iPhones take big bite out of AT&T's profits

Apple might be riding high (for the moment) on iPhone profits, but where it has won, AT&T has lost out.

The US' biggest carrier said it has sold 2 million 3G iPhones in the third quarter, but that the greater than expected popularity had cost it US$900 million (€703.62 million) in subsidies.

AT&T also said that iPhone subsidies would have an adverse impact on its full financial year results, as it expected sales of the iPhone to be strong in the final, Christmas quarter.

Its shares fell almost 5% after the announcement yesterday.

AT&T predicted that its full year margins would be adversely affected by subsidies to the iPhone.

In the longer term, though, AT&T should see payback from its iPhone customers. It has exclusive rights to the iPhone in the US and 40% of iPhones bought in Q3 brought new subscribers to AT&T's network.

Even better, iPhone users tend to remain loyal to the network as well as spending far more than the average user.