AT&T Wireless Growth Still Strong, Despite Earnings Drop

Complaints about 3G coverage aren't putting a dent in AT&T's wireless business, as the carrier added 1.86 million wireless customers in the first quarter of 2010.

AT&T coverage a concern, not speed

In total, AT&T now has 87 million wireless subscribers, an 11.2% increase over the 78.2 million subscribers it had at the end of the first quarter of 2009. Of these 89 million, roughly 65 million are postpaid customers, which generate more average revenue than subscribers to prepaid services. Additionally, AT&T also posted a significantly improved 1.30% wireless churn rate for the first quarter, suggesting that AT&T's customers today are more likely to stick with the carrier than they were a year ago when the carrier posted a 1.56% wireless churn rate.

All of these customer additions have given AT&T a key boost in its wireless earnings at a time when its overall earnings are in decline. AT&T's wireless segment posted $4.2 billion in earnings in the first quarter of this year, a 20.7% rise from the $3.5 billion net income it posted in first quarter of last year. AT&T overall saw its earnings drop to $2.5 billion in first quarter 2010, a drop of 20.8% from the $3.1 billion in earnings it reported in first quarter 2009.

AT&T got a boost last quarter from the continued popularity of the Apple iPhone, which only runs on AT&T's network in the United States. Apple reported selling a total of 8.75 million iPhones worldwide last quarter, beating Wall Street expectations for iPhone sales by more than 20%. A hefty chunk of these iPhone sales benefited AT&T, which reported activating 2.7 million new iPhones on its network last quarter. AT&T also said that roughly 900,000 of these iPhone activations represented new AT&T customers.

AT&T's overall business is still being harmed by the continuing decline in its wireline segment, which reported a net income of $1.7 billion last quarter, a 16.7% drop from the $2 billion net income it reported in the first quarter of 2009. Lower revenues in the company's wireline voice operations accounted for a significant amount in the segment's decline in earnings, as the $7.4 billion in revenues the company generated from wireline voice in the first quarter of 2010 represented a 12% drop from the $8.5 billion in revenues wireline voice generated in the first quarter of 2009.

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