AT&T sold a record 10M smartphones in Q4

Analyst suggests prepaid growth slowing as AT&T, Verizon rack up major Q4 sales
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AT&T Mobility (NYSE:T) reported it sold a record 10 million smartphones in the fourth quarter, another indication that Tier 1 postpaid carriers enjoyed strong sales and subscriber activations during the period--likely at the expense of prepaid carriers.

AT&T said the 10 million figure bested its previous record of 9.4 million, which AT&T achieved in the fourth quarter of 2011. AT&T said its fourth-quarter 2012 sales included its best-ever quarterly sales of Android and Apple's (NASDAQ:AAPL) iPhone. Interestingly, the carrier did not indicate how well Microsoft's (NASDAQ:MSFT) Windows Phone devices performed during the quarter; AT&T has been a major Windows Phone supporter. According to Reuters, AT&T's figures suggest AT&T sold 26.7 million smartphones in 2012, higher than the 26 million it had previously given as its expectation, a figure that was itself higher than an earlier projection of 25 million.

The announcement from AT&T is not exactly a surprise. At an investor conference in early December, AT&T Mobility CEO Ralph de la Vega said the company was on track to sell a record number of smartphones in the fourth quarter. At the time, he said that in the first two months of the fourth quarter the carrier had sold 6.4 million smartphones, more than the 6.1 million it sold in all of the third quarter.

In a statement, de la Vega noted that smartphone customers produce average revenues twice those of non-smartphone subscribers. He also said that during the fourth quarter the company averaged more than 110,000 smartphone sales per day. Those smartphone sales will likely boost AT&T's revenue for the fourth quarter, but they could depress the carrier's wireless operating margins, since AT&T will likely incur higher subsidy costs.

De la Vega told the Wall Street Journal that the company is watching T-Mobile USA's decision to drop device subsidies from its plans this year. He said AT&T could make a similar move if it proves popular, but he said the company is not too concerned. "Our research says that they [customers] don't like paying upfront for the phone," he said. "There didn't seem to be the appetite for that kind of plan."

AT&T's announcement about its smartphone sales comes a day after rival Verizon Wireless (NYSE:VZ) gave some clues about its fourth-quarter numbers. Verizon Communications CEO Lowell McAdam said at an investor conference that the carrier notched 2.1 million net subscriber additions during the period, 30 percent of which were new to Verizon. McAdam further said that smartphones made up 87 percent of Verizon's device sales in the fourth quarter.

Separately, prepaid carrier MetroPCS (NYSE:PCS) reported that it lost around 93,000 subscribers during the fourth quarter, bringing its total subscriber loses for 2012 to around 460,000.

"These numbers suggest that regional prepaid carriers are having a tough time retaining customers as national carriers roll out competitive plans at the same time that prepaid growth is beginning to slow," New Street Telecom analyst Jonathan Chaplin wrote in a research note.

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

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AT&T's de la Vega: We're on pace for 'record' smartphone sales in Q4
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