AT&T Mobility rides Q4 smartphone growth

Just days after rival Verizon Wireless posted robust fourth quarter 2009 results, including 2.2 million net customer additions, AT&T Mobility said it had added nearly 2.7 million subscribers to its network during the final three months of 2009, further tightening the size difference between the industry’s No. 1 and No. 2 players.
Similar to the reseller-fueled growth experienced by Verizon Wireless, AT&T Mobility said 1.8 million of its net customer additions during the quarter were through third-party partners. Factoring out such channels, Verizon Wireless managed to add more direct customers posting gains of 1.2 million net customers during the quarter compared with AT&T Mobility’s 910,000 direct net additions. AT&T Mobility ended 2009 with 85.1 million customers on its network compared with 91.2 million subscribers for Verizon Wireless.
Helping boost AT&T Mobility’s 27% year-over-year surge in customer additions was a drop in customer churn from 1.64% during the fourth quarter of 2008 to 1.44% in 2009.
Also pushing that growth was the continued reliance on Apple Inc.’s iPhone that analysts said continues to make up a significant portion of the carrier’s customer additions and pressures its margins. AT&T Mobility said it activated 3.1 million iPhones during the quarter. AT&T Mobility forks out several hundred dollars in handset subsidies for each iPhone sold, which it looks to make up over the term of a contract in mandatory data charges. AT&T Mobility reported that iPhones account for approximately 18% of its customer base and approximately 23.5% of its postpaid base. Smartphones in general represented more than 46% of devices on the carrier’s network at the end of 2009.
AT&T Inc.’s overall margins were at 38.8% during the fourth quarter, which was ahead of the 38.3% posted in the previous quarter, but well behind the mid-40% posted by Verizon Communications Inc.
The strong increase in smartphones also helped push AT&T Mobility’s data revenues up 15% year-over-year to $15.56 during the fourth quarter, while postpaid average revenue per user increased 2.6% to $61.13. The carrier’s total revenues jumped 7.6% year-over-year from $12.9 billion during the fourth quarter of 2008 to $13.8 billion in 2009, and full year revenues were up 8.6% from $49.3 billion to $53.6 billion.
Plans for 2010
Looking to stem increasing ire over insufficient network capacity, AT&T said it plans to increase capital expenditures up to 10% in 2010, with an expected $2 billion increase targeting its wireless network and backhaul capabilities. Those upgrades include a three-times increase in the amount of fiber to cell towers compared with 2009, expanded deployment of Ethernet-based backhaul capabilities, the addition of 2,000 cell sites, and specific plans to boost network capacity in New York and San Francisco, two markets targeted by critics as having some of the worst network congestion issues.