The phone company said yesterday that its third-quarter net income rose 41 percent as the cellphone helped bring in new customers.
AT&T’s wireless unit added two million subscribers in the third quarter, an increase of 47 percent, for a total of 65.7 million subscriptions. The wireless growth offset a 4.7 percent loss of the San Antonio company’s landline customers.
“We had an excellent quarter in wireless growth,” Richard Lindner, AT&T’s chief financial officer, said in a conference call with analysts.
AT&T is clearly benefiting from Apple’s strong sales of the iPhone. It is the sole supplier of the cellphone service.
AT&T said it had activated 1.1 million subscriptions for iPhone users, and that roughly 40 percent of those subscribers were new AT&T customers.
Apple helped increase iPhone sales last month when it cut the price of the device from $599 to $399. AT&T reported net income of $3.06 billion, or 50 cents a share, in the third quarter, up from $2.17 billion, or 56 cents a share, in the same period last year. Revenue nearly doubled to $30.13 billion, from $15.6 billion in the quarter last year.
John Hodulik, an analyst with UBS, said that AT&T’s gross subscriber growth was particularly impressive considering that four out of five Americans already had cellphone service. AT&T took some market share from competitors during the quarter, he said. The company’s churn, or turnover rate, for customers under contract fell to 1.3 percent from 1.5 percent in the third quarter last year.
The company said that excluding costs related to acquisitions, it would have earned 71 cents a share, up from 63 cents a share a year earlier, which was in line with Wall Street’s expectations. The company announced its results before trading opened yesterday. AT&T shares increased more than 2 percent during the regular trading session to close at $42.02.
Revenue in AT&T’s wireless business increased 14 percent, to $10.94 billion, aided by increased use of data services like messaging, said Mr. Lindner. Wireless data revenue increased 64 percent during the quarter.
Most of the increase in AT&T’s wireless sales can be attributed to the company’s acquisition late last year of Bell South, which made AT&T the sole owner of Cingular Wireless.
In the landline business, AT&T customers continued to drop the service or contract with other companies, like those offering Internet-based phone service. To hold onto customers, AT&T has offered video and data service.
The company has been pushing its Internet TV service, U-verse, in hopes of stemming defections to cable companies that offer bundles of services that include phone, television and Internet. During the third quarter, the number of U-verse subscribers increased by 75,000, to 126,000.
“We’ve made sound strategic moves to better serve customers and expand our potential in key growth areas,” said Randall Stephenson, AT&T’s chairman and chief executive officer. Among those new offerings is a recent deal with Napster to offer a music download service, although critics have scoffed at the $1.99 price of a song when other new entrants to the business, like Amazon.com, are offering songs for 89 cents.
But while AT&T’s U-verse service is growing, it appears to still suffer from the quality problems — there was a major service failure last weekend — that have marred acceptance since its debut.
Furthermore, Mr. Lindner conceded to analysts, it still required about seven hours for AT&T technicians to install the service in a customer’s home.
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