AT&T Beats Estimates, but Closer Look Reveals Mixed PictureVW Staff
On Tuesday, AT&T Inc. (NYSE:T) reported its first quarter earnings and its net income beat analyst estimates. One of the contributing factors to the company’s good quarter was the sale of Apple’s iPhones.
As the first carrier to offer the iPhone, AT&T Inc. (NYSE:T) remains “the” network for the coveted phones. According to figures from its quarterly annual report, the company sold 5.5 million smartphones in the first quarter; from this number, 4.3 million of smartphones activated had been iPhones. This compares to the 7.6 million from the fourth quarter with the launch of the iPhone 4S but higher than the 3.6 million iPhones from the same quarter in 2011.
What does this activation number translate to for the company? Its means that the iPhone brings 78 percent of total smartphone sales. But keep in mind that “iPhone activations” may include previously used phones.
In addition, AT&T’ also disclosed that close to 60 percent of its postpaid customers are smartphone customers. By breaking this down, this translates to the company’s customer base as nearly 50 percent iPhone users; it is still growing.
While these numbers paint a good picture for iPhone sales, a closer look at AT&T’s quarterly numbers show that it pretty much did not add phone subscribers to contract-based plans in the quarter. This is an important number as these plans are profitable and it measures growth for a company.
According to the earnings report, AT&T Inc. (NYSE:T) increased net customers to 187,000 on contract-based plans for the first quarter; however, the majority of this number are tablet users, thanks to the launch of Apple’s new iPad last month. From contract-based plans, these tablet customers will pay between $15 and $50 per month; this compares to smartphone customers who typically pay more than $100.
The report also noted that AT&T saved money from selling less iPhones than analysts had expected. With each new iPhone, AT&T subsidizes them hundreds of dollars with the intent to make the money back through service fees.
In response to AT&T’s report, Apple’s shares dropped as investors looked as its iPhone sales predicting bad news for Apple’s impending earnings report.
How’s the Competition?
Last week, Verizon Communications Inc. (NYSE:VZ) announced its first quarter numbers and said it had activated an additional 3.2 million iPhones in the quarter. This represents a 1.1 million units decline ( 24 percent) from the successful holiday quarter with the activation of 4.3 million iPhones.
From a big picture perspective, Verizon had activated an overall 6.3 million smartphones, with 9.1 percent from LTE.
The company also reported that it had added 501,000 subscribers on its contract-based plans. In the last five quarters, the company has surpassed AT&T by adding almost three times as many contract subscribers. During the previous two years, the competitors had been evenly split when adding new subscribers.
And there’s the No. 3 carrier, Sprint. It lags behind its competition and it will announce its quarterly earnings on April 25.