AT&T's Profits Dip, But iPhone Sales Surge

Growth in wireless data services helped offset declines in traditional voice and data offerings.



AT&T's wireless division continued to perform well in the third quarter, but the decline in fixed-line services, legacy data, and print advertising products led to a 1.2% year-over-year dip in profits.

The telecommunications giant posted earnings of $3.2 billion, down slights from the $3.23 billion it reported for the same period last year. Overall revenues dropped 1.6% to $30.86 billion.

AT&T's wireless unit had another strong quarter, as the company added two million new subscribers. This was the first full quarter that counted the launch of the iPhone 3GS and the $99 iPhone 3G, and AT&T said it activated 3.2 million Apple handsets, with nearly 40% from subscribers new to AT&T. The wireless operator is the exclusive U.S. provider of the iPhone, and it reportedly is trying to extend that deal thanks to Apple's ability to nab new customers.

These data-hungry iPhone users, as well as BlackBerry and mobile broadband users, led to a 33.6% increase in wireless data revenues. This segment earned $3.6 billion for the quarter, and AT&T's wireless operating income margin was 24.6%.

The company has been facing growing criticism from a small, but vocal, group of users regarding its 3G reception and coverage in major metropolitan areas, but AT&T saw a record-low number of subscribers cancel their wireless service contracts for the third quarter. The company's 1.43% churn rate could be a sign that its efforts to improve its 3G network are resonating with customers.

The wireline business continues to stagger as businesses and individuals move toward wireless options in increasing numbers. AT&T's wireline business revenues fell 7.1% with a 30% dip in profits, but the company did see some bright spots as it added 240,000 U-Verse TV customers.


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