AT&T sells 2.4M iPhone 3Gs in 3Q, but margins suffer

AT&T's debut of the iPhone 3G in July was a huge hit with consumers and big boost for AT&T in terms of subscribers, but the subsidies on the iPhone 3G wreaked some havoc on company's margins. The company said today that it sold 2.4 million iPhone 3G devices in the third quarter, and its total net adds were 2 million, bringing AT&T's total wireless customer base to 74.9 million. However, iPhone 3G subsidies reduced pretax third-quarter earnings by $900 million or 10 cents per share. AT&T's wireless operating income margin was 22.8 percent vs. 26.4 percent in the year-earlier quarter. AT&T wireless revenues were up 15.4 percent to $12.6 billion and wireless service revenues were $11.3  billion.

During this morning's call with investors Ralph de la Vega, CEO of AT&T Mobility and consumer market, said that the iPhone 3G will provide substantial long-term value for the company and said that already it has caused same-store traffic to increase, and contributed to strong data revenue growth. Here's breakdown of the third-quarter metrics:

Subscriber growth: Total wireless subscribers increased 2 million, with retail postpaid subscribers increased 1.7 million, which is the largest quarterly postpaid subscriber increase in company history. The company sold 2.4 million iPhone 3G devices and 40 percent of those activations were for customers that are new to AT&t.

Churn: Churn was 1.7 percent--the same as the year-earlier quarter. Postpaid churn was 1.2 percent, down from 1.3 percent in third quarter 2007.

ARPU:  Average revenue per user was $58.99, up 2.6 percent vs. third quarter 2007.

Data: Data revenue increased 50.5 percent over the previous year for a total revenue of $2.7 billion. MMS volumes were more than double third quarter 2007 volumes. AT&T's UMTS/HSPA network is in 324 cities and will expand to 350 by year-end. 

Devices: About 22 percent of AT&T postpaid wireless customers have an integrated device, up from 10.5 percent a year ago. About 17 million AT&T customers have 3G devices. Nearly 5.9 million customers use 3G LaptopConnect cards and broadband-speed integrated devices with a Qwerty or touchscreen keyboard.

For more:
- see this press release

Related articles:
AT&T adds 1.3M subs; wireless data revenue surges
AT&T will subsidize 3G iPhone