Analysts expect boffo Q4 from AT&T with 12.5M postpaid devices sold

The expected launch of Apple's (NASDAQ: AAPL) iPhone 6 is likely going to be a boon for many carriers, but will especially juice AT&T Mobility's (NYSE: T) numbers, according to a new research report from financial analysts at Jefferies. Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata wrote in a research note that AT&T is expected to sell 12.5 million postpaid devices in the fourth quarter, which would be up 36 percent from the 9.6 million it sold during the fourth quarter of 2013.

"When considering it is likely that more than half of AT&T's postpaid handset subscriber base uses an iPhone, and the iPhone 6 is likely to provide enough new features to drive significant upgrade activity, we expect record device volumes" in the fourth quarter, the analysts wrote.

Also, the analysts said that AT&T is expected to sell fully 80 percent of its handsets in the fourth quarter through its Next equipment installment plan.

However, the analysts think AT&T's push away from subsidizing devices and toward Next should mitigate the financial pain of so many new smartphone sales. Next lets customers get smartphones for $0 down, pay off their devices in monthly installments and upgrade after 12 monthly payments. Thus, carriers don't have to deal with the upfront cost of subsidized devices.

"Despite the larger volume, and unlike prior years, we expect margins to be maintained, a benefit of AT&T's rapid adoption of Equipment Installment Plans," they wrote.

AT&T said Next sales represented around 50 percent of all smartphone sales in the second quarter, up from 40 percent in the first quarter (or 35 percent when taking out accelerated upgrades). Further, Apple has notably started letting customers buy an iPhone on its website through Next, but not yet through other carriers' handset upgrade programs. Apple is expected to unveil the next iPhone on Sept. 9.

Unlike in the years past, when AT&T has taken a hit in margins due to massive iPhone upgrades each with a roughly $450 subsidy, Next should insulate AT&T's margins, they analysts wrote.

"We expect AT&T's margins to be much more stable in the fourth quarter of 2014  as the plans have a much lower subsidy than their contract counterparts," of around $120 to $150 per handset, the analysts wrote.

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