The telecom paid a high price to get the iPhone 3G to its $199 price point, as subsidies cost the company nearly $900 million.
The largest U.S. telecom reported a boost in sales and revenue thanks to its wireless services and the rapid adoption of Apple's iPhone 3G.
AT&T reported net income of $3.2 billion for the third quarter, on revenue of $31.3 billion. For the same period last year, the company had $3.06 billion in profit.
The wireless unit was a star during the quarter, with a 15.4% growth in revenue. The company was boosted by the launch of the iPhone 3G, and AT&T activated 2.4 million Apple handsets for the quarter. These iPhone users are highly valued because they deliver higher average revenue per user than other handsets, and about 40% of them were new AT&T wireless customers.
"I am particularly pleased with the customer response to the iPhone 3G," said Randall Stephenson, CEO of AT&T, in a statement. "The new customers we're winning are high-value, with attractive revenue and churn profiles. We're expanding the market, as users adopt more data and media-rich services and access a wide array of applications. These achievements are positive for the future of our business."
The telecom did pay a high price to get the iPhone 3G to its $199 price point, as subsidies cost the company nearly $900 million. It's estimated the subsidy costs about $375 per unit, and it cost about 10 cents per share.
"I know some of you are concerned with the dilution we experienced this quarter with the new iPhone launch," CFO Rick Lindner told analysts on a conference call. "But I believe our results will bear it out that it is an important investment in our future."
Wireless continues to be a bright spot for the company, as it ended the quarter with 74.9 million subscribers. This trend could continue for the next quarter, as the company will soon be releasing another highly anticipated smartphone, the BlackBerry Bold.
In the traditional phone business, AT&T saw revenue decline 8.1% to $9.5 billion as it lost 10.6% of its voice lines from a year ago. Sales to large corporate customers were also down, partly because of the economic slowdown.
The company's IPTV service, U-Verse, added 232,000 customers, giving it a total of 781,000 users.
Building A Mobile Business MindsetAmong 688 respondents, 46% have deployed mobile apps, with an additional 24% planning to in the next year. Soon all apps will look like mobile apps – and it's past time for those with no plans to get cracking.