iPhone, 'connected devices' propel AT&T Mobility's Q3 growth

AT&T Mobility (T) posted robust overall customer growth during the third quarter led by strong activations in its “connected devices” and prepaid operations that offset steep declines in traditional postpaid customer growth.
AT&T Mobility added 2.6 million new connections during the quarter, including 745,000 direct postpaid net additions, 321,000 direct prepaid net additions, 1.2 million connected devices, and 406,000 net additions through resale partners. The carrier ended the quarter with 92.8 million total connections on its network.
The customer growth was a 30% jump compared with the 2 million customers the carrier added during the third quarter of 2009, led by a significant increase in connected devices and prepaid additions that counteracted a 44% drop in postpaid customer growth. The drop in postpaid growth was due to declining gross activations as segment churn remained steady at 1.14%, while total churn dropped from 1.42% during the third quarter of 2009 to 1.32% this year.
AT&T Mobility said it activated a record 5.2 million Apple Inc. iPhone devices during the quarter with 24% of those activations, or 1.25 million total devices, from customers new to the carrier’s network. AT&T Mobility added that more than 57% of its postpaid customer base had integrated devices at the end of the quarter.
(AT&T Mobility considers any device with a real or virtual QWERTY keyboard as an integrated device, while connected devices include those like e-readers and machine-to-machine devices.)
“This was a terrific mobile broadband quarter,” said Randall Stephenson, AT&T chairman and chief executive officer. “A record number of customers signed new two-year contracts and integrated device 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.”
That strong integrated device growth helped the carrier push wireless data revenues up more than 30% to $4.8 billion for the quarter, accounting for around 35% of the carriers total wireless revenues. Those total revenues increased more than 10% year-over-year to nearly $13.7 billion.
Wireless operating revenues accounted for 43.3% of AT&T’s $31.6 million in total operating revenues for the quarter, an increase from the 40.3% it contributed during the third quarter of 2009.
Despite the strong growth, wireless operating income margins decreased year-over-year from 25.6% to 23.1% and, operating income before depreciation and amortization dropped from 40.3% to 37.6%, which the carrier said was “impacted by increased operating costs associated with the company’s record quarter for integrated device activations.”
AT&T’s stock was trading down just over 1% in early Thursday trading at $28.26 per share.