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AT&T: 1Q Profits Down, iPhone Customers Up

Phone giant AT&T said today its first quarter profit dropped 9.7 percent due to weakness in its traditional wireline phone business. The earnings were, however, above analysts' expectations.

Wireline revenues fell 5.4 percent, as the rate of people cutting traditional phone service fell 12 percent.

There was some positive news for the company. AT&T saw a net 1.2 million wireless subscribers join, driven mostly by 1.6 million new customers of Apple's iPhone, for which AT&T delivers exclusive service. More than 40 percent of those that activated iPhones were new customers to AT&T.

Net income was $3.1 billion, or 53 cents a share, compared with $3.5 billion or 57 cents a share in the period a year earlier. Earnings were reduced by 5 cents a share because of increases in pension and retiree expenses. Excluding those items, earnings were 58 cents a share, exceeding analysts' expectations of 48 cents a share.

Revenue was $30.6 billion, slightly lower from $30.7 billion in the quarter a year earlier. Analysts had expected revenue of $31.1 billion.

Showing the increased popularity of Internet applications over wireless devices, particularly the iPhone, wireless data revenues rose 38.6 percent to $3.2 billion.

"AT&T's well positions for the next wave of wireless growth," said chief financial officer Rick Lindner in a conference call. "The foundation is a strong spectrum position ... second is great device lineups with exclusives like the iPhone and Blackberry Storm."

Lindner wouldn't comment about rumors of an upgraded version of the iPhone this summer, saying he would leave that to Apple to announce. He also didn't address the status of AT&T's exclusive ties to carry voice and data service for the iPhone. Both companies refuse to say how long the partnership is, though there is speculation the contract may end within one year.

The exclusive contract was the source of much debate by lawmakers two years ago as consumer groups and some policy makers at the Federal Communications Commission viewed the agreement as anti-competitive and likely to lead to higher costs for consumers.

"Overall, the results are likely to draw a sigh of relief," said Sanford & Bernstein analyst Craig Moffett in a report. "AT&T's results show that the company is well-positioned to handle the recession from a cost management perspective, and equally well-positioned to emerge stronger when the recession (eventually) ends."

By Cecilia Kang  |  April 22, 2009; 11:08 AM ET  | Category:  Cecilia Kang
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Hopefully this rosy forecast will contribute to mutually successful ongoing labor contract negotiations without slashing and burning employee benefits / wages.

Posted by: clancysf | April 22, 2009 12:05 PM

What nobody seems to be picking up on is starting in JUNE the first of the iphones are going to start coming off contract. I look to see "no strings attached" iphones on eBay for about $225--would you rather have the latest bells and whistles AND a ring in your nose--a rather expensive ring--or would you rather have about the same thing--no strings?--some will go either way--but the whoosh you hear will be people either selling their phones to people who wouldn't have ATT on a bet--or keeping them, but switching carriers. I have a G3 in my pocket--but it certainly isn't serviced by ATT

Posted by: Skerns0301 | April 23, 2009 1:09 PM

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