AT&T Mobility (T) looks to have hit an iPhone wall, with the iconic device still remaining a big seller for the carrier, but a greater share of new customers looking elsewhere when selecting the device.
AT&T Mobility said it sold 5.5 million smartphones during the first quarter, representing 78% of all postpaid device sales. Apple’s iPhone models accounted for 4.3 million of those smartphone sales. Macquarie Equities Research noted smartphone sales came in below estimates, which was attributed to share losses versus Verizon Wireless. The firm said it expected this trend to accelerate in the run-up to a potential LTE-equipped iPhone launch later this year.
Macquarie Equities noted that Verizon Wireless’s dominance in postpaid growth has been strong since the first quarter of last year and that it has also bested AT&T Mobility in iPhone sales since beginning to offer the device just over a year ago. The financial firm estimated that Verizon Wireless added 2.5 million new customers through iPhone sales during the first quarter of this year, compared with just 903,000 new iPhone customer additions for AT&T Mobility.
The lower-than-expected sales of smartphones did help AT&T Mobility beat margin estimates, since it actually pays more in subsidies to Apple than it makes in revenue on each sale. Wireless earnings before interest, taxes, depreciation and amortization service margins were 41.6% compared with forecasts of around 39%.
AT&T Mobility did note that it ended the quarter with 59.3% of its postpaid customer base owning a smartphone, and 30% of those customers carrying a device compatible with the carrier’s HSPA+ or LTE network. This penetration seemed to help boost average revenue per user results, which increased 1.7% year-over-year to $64.46 with wireless data ARPU surging more than 15% to $26.92.
Net customer additions plummeted 63.4% from nearly 2 million during the first quarter of 2011 to just 726,000 net additions this year. The biggest portion of that drop came from the carrier’s “connected devices” segment that dropped from nearly 1.3 million net additions in 2011 to just 230,000 net additions this year. AT&T Mobility’s “reseller” segment also experienced significant degradation, falling from 561,000 net additions last year to just 184,000 net additions during the first three months of 2012.
AT&T Mobility’s more traditional channels both posted year-over-year growth, with postpaid net additions more than tripling to 187,000 subscribers, while prepaid was up 47.1% to 125,000 net additions. AT&T Mobility ended the quarter with nearly 104 million total connections on its network, including 69.4 million direct postpaid, 7.4 million direct prepaid, 13.9 million reseller and 13.3 million connected devices.
Helping boost the profitable postpaid growth was a dip in customer churn from 1.18% during the first quarter of 2011 to 1.1% this year. However, total churn increased from 1.36% last year to 1.47% this year.
By comparison, Verizon Wireless reported 734,000 total net customer additions for the first quarter, which was a 16.5% year-over-year drop for the carrier. However, Verizon Wireless reported 501,000 postpaid and 233,000 prepaid customer additions for the quarter.
AT&T Mobility posted a 5.4% increase in wireless revenues to $16.1 billion, which accounted for just over half of AT&T’s $31.8 billion in company-wide revenues for the quarter. Wireless expenses increased just 3.4% helping push total wireless income up 11% to nearly $4.4 billion. The carrier noted that capital expenditures totaled just over $2.3 billion for the quarter, which was below estimates of $2.8 billion. Analysts said they expect AT&T Mobility to ramp up network spending through the rest of 2012 in an attempt to better match rival Verizon Wireless’ LTE coverage.
AT&T’s stock was trading up more than 3.5% early Tuesday.
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