AT&T: Thank God for Vitamin i
by John Paczkowski
Posted on July 23, 2009 at 6:22 AM PT
Reporting better-than-expected second-quarter earnings this morning, AT&T said it activated 2.4 million iPhone accounts–35 percent of them for new customers. And it saw its wireless data revenue rise 37.2 percent to $3.4 billion and subscriber churn fall to 1.09 percent, a record low.
Clearly, the debut of the iPhone 3GS and Apple’s decision to cut the price of the low-end iPhone to $99 had an enormous impact on AT&T’s bottom line. “AT&T iPhone subscribers, both new customers and upgrades, take two-year contracts with data packages,” the company said. “As a result, robust iPhone demand drives strong recurring revenues and substantial long-term value.”
Litter wonder, then, AT&T (T) is said to be doing it all it can to renew its iPhone exclusivity deal. The company is clearly dependent on the device for some of its most recent gains.
In fact, Commresearch analyst Gregory Lundberg says that were the iPhone to be excluded from the company’s latest financials, 25 percent fewer people would have signed up for its service in the second quarter than in the first. So if it’s true that Verizon (VZ) is in talks with Apple (AAPL) about adding the iPhone to its product lineup, AT&T has a lot to worry about, indeed.
As Pali Research recently noted, “As the iPhone exclusivity period rolls off between AT&T Wireless and Apple, a material number of AT&T customers will flock to Verizon’s superior network. We estimate that nearly a third of AT&T’s post-paid customers are being retained by AT&T primarily because of the iPhone exclusivity.”
Comments
John,
I have had it up to here with your love affair with Verizon and you dissing on all things AT&T. This reminds me so much of the old battles where people kept saying that AT&T could not keep up with UUNet/MCI/Worldcom only to discover that analysts were lining their pockets with stock from Bernie’s company and simply passing along junk out of the MCI/Worldcom propaganda machine.
I am asking you to bring some balance to your writing.
I am pretty fed up with the continuing bashing of AT&T as if Verizon is the second coming. Yesterday I fired up my laptop with my AT&T 3G card here in Northern Virginia and was delighted to receive 3G at 7.4 mb. As promised, AT&T is beefing up its network and IS delivering on its commitment to deliver a great 3G experience.
In addition, they are in the middle of turning on their 850mhz frequencies to complement their 1900 mhz 3G GSM signals. As any technician will tell you, 850mhz performs better through buildings and hills and goes further than 1900 mhz. My sister is already reporting that in New York City, she is able to walk her building and receive a signal this year in places where she used to only get a signal when standing next to a window. If AT&T is guilty of anything it is that they kept their old analog network (which ran on the 850mhz spectrum) up a little longer out of respect for the users of these older devices.
The data demand throughput from the iPhone is nothing short of incredible. AT&T has done a remarkable job in building out its network in a manner that for the most part has kept up with this crushing data load. I am curious to see what would truly happen to Verizon, if they had to contend with the data load that AT&T is dealing with. Remember that all the Blackberry’s in the world running on Verizon’s network do not amount to 1/5th of the data traffic that AT&T is carrying on their 3G, primarily due to the Apple iPhone.
Recently a report was circulated touting speed and throughput from individuals using the major three networks. Their conclusion was reported that AT&T performed significantly poorer than Sprint and Verizon. However, there is a fundamental flaw in this analysis. First, these are based on USER experience, so there is no way to determine the conditions. If they were the same or different. AT&T’s performance may be a victim of the very ease and ubiquity of the iPhone and it’s applications. For the most part, the vast majority of the Verizon and Sprint speeds were determined using laptop connect cards. AT&T had a significant percentage of users report using their iPhones. The very ease with which Apple makes the downloading of the Speedtest app, makes for a significant skewing of results. There is no comparable app for devices running on Sprint or Verizon networks. (If they exist, they simply do not have the utilization on alternative devices, think Blackberry). This leads to a significant number of users reporting from iPhones (which travel, in and out of 3 G coverage) as opposed to more stationary devices such as laptops accessing these other networks.
A final thought, only with AT&T do you have access to the world’s largest wifi network (think starbucks, most hotels, airports, and mcdonalds) included with their iPhone and Blackberry Bold service WITHOUT ADDITIONAL COST! To access these same wifi networks through Sprint or your beloved Verizon, it would cost you extra.
On a side note, comments about Verizon and their fiber optic FiOS network betrays a fundamental flaw in strategic thinking. The AT&T u-verse product delivers a similar experience at nearly 1/2 the cost per customer (How is that for shareholder value). AT&T is not foolish here. Their strategy is to build fiber to the home in all new communities and slowly build out existing areas using MUCH cheaper fiber technology as the demand warrants.
Their fiber strategy is recklessly mis-represented and perpetrated in the media. They DO have a fiber strategy, they are just deploying it in a more cost effective manner than Verizon. Rather than paint Verizon as wise and AT&T as the fool, I suggest it is the other way around with Verizon recklessly spending for a network that is not needed now, using costly technology, while AT&T wisely uses resources and invests using more cost effective fiber technology as the demand warrants.
Ok, I will get off my soapbox now. I simply have had it with the Verizon can do no wrong and AT&T sucks crowd.
Posted by Jim Snowden at July 23rd, 2009 at 8:13 amJim Snowden’s comments are RIGHT ON John!!!!!
If VZ had 1/2 the iPhones on their network that AT&T has, they would be suffering as well!!! Obviously you write about technology but don’t understand how it works!
For you realists out there who want nothing but the best, call 877-U-ASK-ATT and give them code NP2472 you’ll get some great deals, or you can put that same code in the referral box at att.com !
In my opinion, AT&T is working for you! They have to be sticking billions in their network and it will get better! Believe me, I live in Green Bay and we STILL don’t have 3G here! BUT, I know it’s coming and I’ve had VZ service years ago and they treated me so poorly I still have a sour taste in my mouth when I think about them!
Posted by Nathan Prodell at July 24th, 2009 at 5:48 amBravo Nathan and Jim. Bravo. People with common sense still thrive in the world today! Maybe there’s hope after all.
Posted by Eddie Wittacre at July 24th, 2009 at 5:54 am