AT&T, Verizon Report Strong iPhone Sales

Apple's smartphone bolstered sales at AT&T and Verizon Wireless, which both showed strong financial performance in their recent quarterly earnings.
Slideshow: Verizon iPhone 4 Teardown
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Slideshow: Verizon iPhone 4 Teardown
Among the flood of numbers coming from AT&T in its quarterly earnings, perhaps the most interesting is this: smartphone users account for 46.2% of AT&T's postpaid base. In other words, nearly half of all AT&T customers (with contracts) are using a smartphone. That's a huge number.

AT&T says that during its first quarter, it saw record performance, with a full 2 million net new customers. The company signed up 5.5 million new smartphones--3.6 million of which were iPhones. AT&T said that 23% of the iPhone customers were new to AT&T, and churn of iPhone users was unchanged.

An AT&T spokesperson said in a statement emailed to InformationWeek, "This quarter, U.S. customers could buy an iPhone from another company for the first time, and our results show the threat of that competition was overblown. We had the right strategy in place, and in the first quarter, we delivered nearly 1 million more iPhones activated than a year ago with no increase in iPhone churn."

The company saw 2.3% growth in its overall revenues (wireless and wireline businesses), which topped $31.2 billion, up more than $700 million versus the year-ago quarter. Its total wireless subscriber base reached 97.5 million, including 1.3 million new connected devices, and 421,000 subscribers of "branded computing" devices (includes tablets, aircards and other data-only devices).

How did Verizon compare? Pretty well. Its revenues grew 0.3% year-over-year to $27.1 billion for Verizon's wireless and wireline businesses combined. On the wireless side, it saw a 6.3% increase in revenue with 1.8 million net additions, including 906,000 postpaid customers. It reported a total of 104 million total connected devices.

Surprisingly, only 32% of Verizon Wireless's postpaid customers are using smartphones, which Verizon said is up from 28% in the fourth quarter of 2010. Verizon's percentage of smartphone users is two-thirds of AT&T's. Between February 10 and the end of the quarter, Verizon Wireless activated 2.2 million iPhones.

AT&T had something to say about Verizon's iPhone performance. A spokesperson said in an email, "Verizon sold just 2.2 million iPhones. People were expecting a Verizon iPhone to change the world. Instead, we had 3.6 million (23% from new customers). [Verizon's] number was pretty underwhelming by itself, but in addition, they actually had a lower percentage from new customers (22%)." The AT&T spokesperson argued that even though there's been chatter about the fact that Verizon Wireless was only selling the iPhone for seven weeks (versus 13 weeks for AT&T), it believes that is irrelevant. "Since by January 11 it was confirmed that they'd be offering an iPhone … anyone who wanted a Verizon iPhone was waiting for it to be available."

AT&T's points are fair, but it is worth pointing out that the millions of existing iPhone users who might want to switch from AT&T to Verizon are smack in the middle of their contracts. Eating an early termination fee is tough to swallow just to switch networks.

Verizon reported that it has named 100 more LTE markets that will be activated by the end of the year, making for a total of 175. Verizon said it will cover a population of more than 185 million Americans with LTE. It also noted that demand for its LTE products was strong. The company sold 260,000 HTC Thunderbolts--the first LTE-equipped smartphone--since its debut in early March.

With the white iPhone arriving in stores in the coming weeks, both companies are sure to sell more iPhones. The question is, will iPhone sales drop off a cliff as Apple's Worldwide Developers Conference approaches, or will they remain steady until the expected September launch of the next iPhone?