AT&T impresses with 4.7M iPhone activations, but disappoints with low net adds

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Reaction to AT&T Mobility's (NYSE:T) third quarter results were mixed today with the company reporting 6.1 million in smartphone sales in the quarter, of which 4.7 million were Apple's (NASDAQ:AAPL) iPhone. However, AT&T also reported just 678,000 net adds in the quarter, of which only 151,000 were postpaid net adds. AT&T's total customer base is 105.9 million.

Click here for a video message from Ralph de la Vega about AT&T's performance in the third quarter, as well as key slides from the company's earnings presentation.

Ralph de la Vega, president and CEO of AT&T Mobility, noted that there was very strong demand for the iPhone 5 after it launched in September. However, he said that AT&T couldn't meet demand with its iPhone supplies, which meant that the available devices went to existing AT&T customers who wanted to upgrade vs. new customers. AT&T sold 1.3 million iPhone 5 devices in the quarter. De la Vega added that he expects the company will increase its percentage of gross adds in the fourth quarter if the supply constraints for the iPhone 5 ease.

Verizon Wireless (NYSE:VZ) during its third quarter earnings call last week also noted supply constraints around the iPhone 5. Notably, Verizon only sold 3.1 million iPhones in the third quarter, of which 651,000 were the iPhone 5.

De la Vega also touted the fact that the AT&T reported average monthly revenue per user of $65.20, the company's strongest ARPU in six quarters. The company also said its phone-only ARPU increased nearly 3 percent. Competitor Verizon Wireless is no longer reporting ARPU but instead is reporting average revenue per account because of the introduction of its Share Everything plan, which lets customers add multiple devices to one account. AT&T has not said whether it will make a similar change in its metrics.

Interestingly, AT&T's Mobile Share shared data plans, which launched in August, have attracted about 2 million subscribers. De la Vega noted that more than one-third of those customers signed up for the 10 GB or higher data plans.

AT&T also noted that its LTE deployment is ahead of schedule, with the network now covering more than 135 million POPs.  

Here's a breakdown of AT&T's other key metrics for the quarter:

Financials: Total wireless revenues were up 6.6 percent year over year to $16.6 billion. Service revenues were up 4.5 percent to $14.9 billion in the third quarter. Data revenues were up 18.3 percent to $6.6 billion. AT&T's wireless EBITDA service margin was 40.8 percent, compared to 43.7 percent in third quarter 2011. In the second quarter AT&T's wireless EBITDA service margin was 45 percent.  

ARPU: Average revenue per user was $65.20, the strongest in six quarters. Postpaid data ARPU was $28.81, up 14.6 percent from the third quarter of 2011.

Smartphones: AT&T sold 6.1 million smartphones in the quarter and smartphones now represent 81 percent of its postpaid device sales. At the end of third quarter, 44.5 million--or about 63.8 percent--of AT&T's customer base had smartphones, up from 52.6 percent in the third quarter of 2011. The company activated 4.7 million iPhones in the third quarter.

Usage-based data plans: About 64 percent, or 28.5 million, of AT&T's smartphone users are on usage-based data plans. Nearly 2 million subscribers are on its Mobile Share plans. 

Churn: Quarterly postpaid churn was 1.08 percent, compared with 1.15 percent in the same quarter last year. Total churn was 1.34 percent vs. 1.28 percent in third quarter 2011.

Subscribers: AT&T added 678,000 subscribers in third quarter to bring its total subscriber base to 105.9 million. Postpaid net adds were 151,000. Prepaid net adds were 77,000. Connected device net adds were 313,000 and reseller net adds were 137,000.

For more:
- see this release
- see this CNNMoney article

Special Report: Wireless in the third quarter of 2012

Related Articles:
AT&T adds 3.7M iPhones in Q2 as margins improve
AT&T's Q3 earnings focus is margins, while Sprint's is customer growth
Verizon's Q3 service margin hits 50% as customers flock to Share Everything plans
AT&T's Lurie talks Mobile Share plans, Amazon's new LTE tablet and more
AT&T CEO praises FCC's move on spectrum holdings

Article updated Oct. 25 to reflect that the original headline had the incorrect number of third-quarter iPhone activations for AT&T. It was 4.7 million, not 4.5 million.