AT&T, Verizon Subscriber Growth Falling

Valued wireless contract subscribers are petering out while pre-paid consumers are gaining.
AT&T and Verizon Communications announced their first quarter financial reports within hours of each other this week and revealed the same uncomfortable news -- their valued wireless contract subscribers are petering out while pre-paid consumers are gaining.

AT&T signed up just 512,000 contract customers -- 43% lower than the number of contract subscribers it signed in the first quarter of 2009. Verizon reported that its Verizon Wireless unit sold just 423,000 new contract customers and that number represented the lowest contract sign ups in recent years. AT&T's numbers were boosted by sales of Apple's iPhone.

Revenue and profits for both companies are driven largely by their wireless operations, which have been growing, while traditional landline revenues have been declining.

In spite of the dismal numbers for new contracts, both Verizon and AT&T reported data revenues for mobile phones -- particularly smartphones -- were up. AT&T's wireless revenues were up 10%, spurred largely by iPhone usage. While the iPhone has been a rousing success for AT&T, it also has a downside -- it's been so popular that AT&T's network has been burdened, and iPhone users frequently complain about dropped calls. AT&T has said it plans to fix the problem by upgrading its network.

Verizon signed up 1.55 million new mobile customers, but most of them were for prepaid contracts and many of those were sold by resellers. The carrier ended the quarter with the most subscribers in the U.S. -- 92.8 million.

Verizon's earnings were $409 million -- a decrease from $1.6 billion from last year's like quarter. The company, which is 45% owned by Vodafone Group, has been the subject of constant reports that Verizon is planning to buy out Vodafone. However, Verizon CEO Ivan Seidenberg recently said there are no such plans. Investment banking analysts have estimated it would cost Verizon $80 billion to buy out Vodafone's stake.

Both firms reported relatively flat revenue -- $30.6 billion for AT&T, and $26.9 billion for Verizon.

With their wireless operations driving both companies, they view 2010 as a transitional year. AT&T has been surging largely because of its exclusive contract to market the iPhone while Verizon is betting on its powerful soon-to-be unveiled LTE network. In addition, there have been reports for months that Verizon will get an iPhone model, too.