iPhone Helps AT&T Close Gap With Verizon Wireless

Based on the quarterly reports from AT&T and Verizon Communications, just 400,000 customers separate the nation's two largest wireless carriers. Verizon's lead over AT&T has narrowed dramatically.
AT&T reported on Thursday an increase of 2.6 million total wireless subscribers — the highest third-quarter net gain in the company's history — to reach 92.8 million subscribers in service. Last quarter it was at 90.2.

Verizon Communications on Friday announced that its wireless unit added just 997,000 new customers -- two-fifths of what AT&T achieved -- to reach a total of 93.2 million customers. Last quarter it was at 92.2.

That puts Verizon Communications' wireless business just 400,000 customers ahead of its rival, AT&T. Just last quater, Verizon enjoyed a lead of 2 million customers over AT&T. How did this happen?

One could place AT&T's wireless growth on the iPhone 4.

AT&T’s third-quarter growth included 5.2 million iPhone activations, the most iPhone activations ever in a quarter. This is 62% more than the previous quarterly record of 3.2 million, which, by the way, was in the second quarter of this year. AT&T says that 24% of the new iPhone activations were for customers who were new to AT&T.

One quarter of 5.2 million is 1.3 million. That's almost exactly the amount of subscribers by which AT&T closed the gap with Verizon Wireless.

Randall Stephenson, AT&T chairman and chief executive officer, said, "A record number of customers signed new two-year contracts and integrated device (a.k.a., smartphones) sales outpaced our previous best by a wide margin. Wireless revenues continue to grow, churn is reaching record low levels, and postpaid ARPU increased for the seventh straight quarter. These trends add to our momentum and confidence. Mobile broadband is the industry’s most powerful growth driver, and demand is in its early stages in both the consumer and business segments. AT&T is well positioned for the opportunities ahead."

AT&T also reported postpaid churn was 1.14%, which matched its best churn numbers from 3Q09. Total churn reached 1.32% versus 1.42% in the year-ago quarter.

Verizon's retail postpaid churn remained low at 1.07%. Total customer churn was at 1.36% -- both numbers still lower than AT&T's.

So that begs the question, if Verizon didn't give up customers to AT&T, who did? Sprint and T-Mobile are the most obvious answers, though we have yet to see their third-quarter numbers. Pre-paid carriers, such as Virgin Mobile USA, Cricket, and MetroPCS might also have leaked subscribers to AT&T.

Whichever company it was that bled customers to AT&T, the nations' second-largest network operator is now in easy striking range of toppling Verizon. One smash-hit device could be the deciding factor.

Does either carrier have a killer device in the wings? AT&T's lead over Verizon Wireless with not one but three Windows Phone 7 devices could be a determining factor.

This year's fourth quarter numbers are going to be interesting indeed.