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Apple's iPhone Drives AT&T's Profit, Revenue Increase

The company said iPhone 3G unit sales in its first 12 days of availability doubled over the like sales period for last year's iPhone.

AT&T reported generally glowing second-quarter results Wednesday with its exclusive deal to market the Apple iPhone drawing the most attention. The largest U.S. telecommunications company reported net income of $3.77 billion on revenue of $30.87 billion.

The company said iPhone 3G unit sales in its first 12 days of availability doubled over the like sales period for last year's iPhone. AT&T has been heavily subsidizing the data-intensive iPhone and the strategy appears likely to pay off as the company's figures indicate that data revenue, already surging, should pay big dividends in the future.

"Mobility, broadband connectivity, and integrated services that encompass voice, data, and video are driving a new world of communications," said Randall Stephenson, AT&T's chairman and CEO, in a statement. "The Apple iPhone 3G is a dramatic example of this transformation. In the days following our exclusive U.S. launch of this new device, powered by the nation's fastest 3G wireless network, customer response has been everything we had anticipated and more."

Overall wireless revenue grew 15.8% over the previous year's second quarter and, more telling for the future including the iPhone, wireless data services soared 52% to $2.5 billion. AT&T traced the data-services jump to strong adoption of Internet data access, e-mail, and messaging. Text messaging alone tripled year over year while multimedia message volumes grew more than 170%, AT&T said.

The company said it expects strong growth to continue in wireless data services as more and more subscribers pick smartphones like the iPhone and then add data plans.

AT&T has subsidized the iPhone by as much as $720 million so customers can purchase the 3G model phone for as low as $199 including a subscriber plan. As applications for the smart phone are added at a rapid pace, subscribers are expected to increasingly use AT&T's wireless data services and, in the process, to increase revenue streams to the telecommunications giant. Including all new wireless customers, AT&T said it added 1.3 million net new subscribers.

In another area, AT&T said the ramp of its U-verse TV Services posted a net subscriber gain of 170,000 for a total of 549,000. U-verse had been plagued for months by startup problems, but they seem to be behind the company now.

"The company is on a trajectory to reach its target of more than 1 million AT&T U-verse TV subscribers by year-end 2008," the company said in its earnings statement.

The company said wireline revenue fell 2.1%, although business and consumer IP-based data revenues in the wireline operation posted double-digit growth.

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