Unscathed by Verizon's iPhone launch, AT&T activates 3.6M iPhones in quarter

Much to the relief of AT&T Mobility (NYSE:T) executives, Verizon Wireless' (NYSE:VZ) high-profile February launch of the Apple's (NASDAQ:AAPL) iPhone had only a minor impact on AT&T's first quarter earnings. AT&T ended the quarter with 3.6 million iPhone activations and 2 million net adds, bringing its total subscriber base to 97.5 million.

Click here for key stats on AT&T's first quarter.

Click here for key stats on AT&T's first quarter.

The company included 1.3 million connected devices (ereaders, tablets and others) in that total subscriber count. During the first quarter, AT&T only added 62,000 postpaid net customers.

AT&T said it sold 5.5 million smartphones in first quarter, which was its best-ever quarter in terms of smartphone sales. The company said smartphone sales made up 65 percent of device sales in the quarter. During a call with investors, Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets, noted that the company saw its sales of Google (NASDAQ:GOOG) Android devices double monthly in the first quarter.

But AT&T's strong smartphone sales did have a negative impact on the company's wireless margins. AT&T reported a first quarter operating income margin of 25.8 percent, a decline from 30 percent in the year-ago quarter. In addition, the company's wireless service margin was 39 percent, down from 44.5 percent in the first quarter of 2010. De la Vega argued that AT&T recoups the initial subsidies it pays out on smartphones with higher average revenues per user and data revenue growth.

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

iPhone: Despite competition from Verizon Wireless, which started selling the iPhone Feb. 11, AT&T activated 3.6 million iPhones. Approximately 23 percent of those subscribers were new to AT&T, the company said. In addition, the company said that its iPhone subscriber churn was unchanged year over year--which the company said indicated it didn't lose iPhone customers to Verizon.

Data-only device sales: AT&T added 421,000 tablets, aircards and MiFi devices to its network in the first quarter, bringing its total base of data-only devices to 3.4 million. The figure is double the number AT&T reported in the first quarter of 2010.

Net adds: AT&T added 2 million net adds for the quarter, bringing its total subscriber base to 97.5 million. The company added 62,000 postpaid subscribers, 85,000 prepaid customers (a number that includes tablet activations) and 561,000 retail customers. AT&T also added 1.3 million connected devices. However, AT&T said that without the impact from the Alltel merger, its postpaid net adds would have been 165,000.

ARPU: AT&T's average revenue per user was $63.39, an increase of 2.4 percent from the same quarter a year ago.

Churn: AT&T's total churn was 1.35 percent, up slightly from the 1.3 percent the carrier reported in the first quarter of 2010. The operator's postpaid churn was 1.18 percent, also up from the 1.07 percent it reported a year ago. Excluding the impact of the Alltel and Centennial migrations, AT&T's postpaid churn was 1.12 percent for the quarter.

Financials: AT&T's wireless service revenue was $14 billion, up from $12.9 billion in first quarter 2010. The carrier's wireless data revenue increased nearly $1 billion, or 23.9 percent over the year-earlier quarter, to $5.1 billion.

For more:
- see this release
- see this slide presentation
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this FierceWireless Q1 earnings page

Related Articles:
AT&T, undeterred by Verizon, adds 4.1M iPhones in Q4
AT&T: Losing iPhone exclusivity won't dent wireless earnings
AT&T's margins take a hit after activating a record 5.2M iPhones in Q3
AT&T to launch LTE by mid-2011

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