Make no mistake, that surge has been massive. Says AT&T (T): “Since 2008 AT&T’s network in the San Francisco area has experienced a 3G data traffic increase of 2,000 percent.”

Wow. No wonder my calls kept dropping at that last Apple (AAPL) event in San Francisco (yes, an iPhone 3G repeatedly dropping calls at Apple’s Sept. invitation-only music gathering). In any event, the upgrade, which includes the bolstering of backbone infrastructure, should result in better coverage, 3G performance and in-building penetration.

“More than ever before, customers look to wireless communications to stay in touch with family, friends and business colleagues,” said Terry Stenzel, AT&T vice president and general manager for Northern California/Reno. “The additional spectrum helps to enhance the 3G network so that our customers have the best experience when they make a call, check an e-mail, download a video or song, access applications or surf the Internet on their AT&T device.”

Under terms of the agreement, Intel (INTC) will pay AMD (AMD) $1.25 billion (nearly a quarter of AMD’s $4.46 billion market cap) and agree to “abide by a set of business practice provisions” presumably crafted to temper Intel’s allegedly anticompetitive practices. Here are details of the agreement:

Business Practices Provisions Prohibit Intel From:

• Offering inducements to customers in exchange for their agreement to buy all of their microprocessor needs from Intel, whether on a geographic, market segment, or any other basis (Section 2.1.1.a)
• Offering inducements to customers in exchange for their agreement to limit or delay their purchase of microprocessors from AMD, whether on a geographic, market segment, or any other basis (Section 2.1.1.b)
• Offering inducements to customers in exchange for their agreement to limit their engagement with AMD or their promotion or distribution of products containing AMD microprocessors, whether on a geographic, channel, market segment, or any other basis (Section 2.1.2a-b)
• Offering inducements to customers in exchange for their agreement to abstain from or delay their participation in AMD product launches, announcements, advertising, or other promotional activities (Section 2.1.2.b)
• Offering inducements to customers or others to delay or forebear in the development or release of computer systems or platforms containing AMD microprocessors, whether on a geographic, market segment, or any other basis (Section 2.2.2 and 2.1.2)
• Offering inducements to retailers or distributors to limit or delay their purchase or distribution of computer systems or platforms containing AMD microprocessors, whether on a geographic, market segment, or any other basis (Section 2.2.1)
• Withholding any benefit or threatening retaliation against anyone for their refusal to enter into a prohibited arrangement such as the ones listed above.

In return, AMD will drop all its pending litigation against the company and pull out of regulatory complaints worldwide. Finally, the two rivals will enter into a five-year patent cross-licensing agreement.

In a joint statement, the companies said, “While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development.”

Interesting. Clearly, AMD CEO Dirk Meyer’s earlier comments about the ratification of its complaints about Intel’s business practices and the company’s hope for a future in which AMD’s “ability to succeed as a business is really determined by the quality of our products and customer relationships” was quite prefigurative.

During a call to discuss the settlement, Meyer said the accord marks the beginning of a new era, one that changes the game for AMD. “It is an important milestone for us, for our customers, our partners, and most importantly–for consumers and businesses worldwide,” Meyer said.

“It is the culmination years of litigation and regulatory engagement, and we are optimistic that it will usher a new era for our industry,” the CEO continued, further noting that change may not be immediate. “We recognize that it will take time for people to understand how the operating conditions in processor business have changed–but make no mistake–they have changed….We look forward to healthy competition with the mutual respect one would expect between world-class competitors.”

It is unclear if the settlement will affect the antitrust suit brought against Intel by New York Attorney General Andrew Cuomo last week as Cuomo hasn’t yet commented. But the European Union says it will not change its decision in May to fine Intel a record $1.5 billion for anticompetitive behavior.

“The European Commission takes note that Intel and AMD have settled all their litigation and that Intel is paying AMD compensation of one-and-quarter billion dollars,” said an EC spokesman. “But Intel has an ongoing obligation to comply with the commission’s antitrust decision and with EU competition law. The commission continues to vigorously monitor Intel’s compliance with its obligations under the EU antitrust decision.”

“We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.”

Palm CEO Ed Colligan, December 2006

“Five hundred dollars? Fully subsidized? With a plan? I said that’s the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good e-mail machine.”

– Microsoft CEO Steve Ballmer, January 2007

At 37.9 percent, Nokia’s share of the global handset market is the largest in the industry. Odd then to learn that it is not the most profitable. And odder still to learn that that honor belongs to Apple, which has been in the handset market for just two years.

According to Strategy Analytics, Apple’s third-quarter iPhone operating profit was $1.6 billion, while Nokia’s was $1.1 billion. Driving Apple’s profits: Strong sales, high wholesale prices and tight cost controls.

“We have identified at least 4 key factors underlying Apple’s success,” Strategy Analytics analyst Alexander Spektor explains. “First, Apple created a simple sub-brand–the iPhone–which was memorable and easy to remember. Second, the firm developed an attractive family of models with standout usability that enabled Apple to charge way-above-average prices to operators and consumers. Third, Apple distributed and co-marketed its handsets through top-tier carriers in numerous high-value countries. And fourth, the vendor has kept a solid grip on production costs by working with Foxconn, the world’s largest contract handset manufacturer.”

Quite an achievement for Apple (AAPL) and a major humiliation for Nokia (NOK), which has seen its dominance eroded by the likes of Apple and Research in Motion (RIMM), and not just in North America, but in Europe. Indeed, in its latest quarter Nokia’s smart-phone market share dropped by six points.

As Strategy Analytics analyst Neil Mawston noted at the time, “[Nokia has] no iPhone killer to drive a major revival in its smartphone volumes. [It] is still struggling in the U.S. smartphone market, and with competition intensifying in China as well, Nokia’s battles can only get tougher in 2010.”

With Clearwire struggling to build out a next-generation network that will go up against Verizon Wireless (VZ) and AT&T (T) for future mobile customers, Sprint has little choice but to throw more money at it. But it’s not alone in doing so. Fellow partners Comcast (CMSCA), Time Warner Cable (TWC), Intel (INTC), Eagle River Holdings and Bright House Networks are also making additional investments, though together they total only $500 million.

Oddly absent from this list is Google (GOOG), which participated in a May 2008 investment round that pumped $12 billion into Clearwire but has evidently decided to sit this one out. Said Google spokesman Andrew Pederson: “We have already made a significant financial investment, and at this point we think the best way we can continue to add value is through continued product and strategic cooperation.”

One wonders if the shared mission of which the two companies boasted when the deal was announced has somehow changed in the ensuing year.

“Verizon is displaying maps of the United States that purport to show each carrier’s ‘3G’ coverage. The maps use color to depict the areas of the country in which each carrier has ‘3G’ coverage and blank or white space in the areas of the country where ‘3G’ coverage is not available. Consumers are interpreting the white or blank space on the maps to mean that AT&T customers who are not in an AT&T ‘3G’ coverage area have no wireless coverage whatsoever, and therefore have no ability to use their wireless devices for any purposes in vast areas of the country. This interpretation is not surprising as Verizon, in its own coverage maps, uses white space to inform customers that no coverage of any kind exists. Contrary to the misleading message conveyed by Verizon’s advertisements, AT&T customers can fully use their wireless devices outside of a ‘3G’ coverage area and undisputedly have coverage in areas depicted by the white or blank spaces on the maps used in Verizon’s advertisements.”

– Excerpt from AT&T’s complaint against Verizon

If AT&T’s lawsuit over Verizon’s allegedly misleading “there’s a map for that” wasn’t a public relations mistake to begin with, it will be by the time Verizon gets through with it. Responding to the suit today, Verizon (VZ) rep Jeffrey Nelson used it to stoke public perception that AT&T’s (T) network is inferior to Verizon’s.

“This is a junk lawsuit. It has no merit,” Nelson told Adweek. “It’s surprising that rather than defend the ‘blue’ hot spots on their 3G map, our competitor instead focuses on their white spaces. The maps clearly note that the comparisons are of 3G service, and further note that voice and data services are available in other places.”

Way to draw attention away from Verizon’s claim of a superior network coverage, AT&T.

In its second quarter–the first with the Pre in its lineup–Sprint (S) lost 991,000 postpaid subscribers. And in its third, reported yesterday, its lost 801,000. So subscriber loss, while unquestionably gruesome, is diminishing.

How much of this is due to Palm’s (PALM) Pre? Not that much, says CL King & Associates analyst Lawrence Harris, who believes the Pre had only a moderate impact on Sprint’s postpaid subscriber base.

“Within postpaid, the number of CDMA-only subscriber losses was about 100,000 in the September quarter, compared to the 200,000 in the June quarter,” Harris wrote in a research note to clients. “At Sprint, the Palm Pre is a CDMA-only postpaid device. The number of Sprint postpaid subscribers upgrading their handsets was slightly higher in the September quarter than in the June quarter at just over 2.0 million.”

According to Harris, “This number provides some indication of the available market for all high-end devices at Sprint. In Palm’s August quarter, 85% of the company’s sales went to Sprint. Given the absence of growth in Sprint’s CDMA postpaid category, it appears likely that most of the Palm Pre sales went to existing Sprint subscribers as opposed to winning customers from other carriers.”

That would seem to be the case. Sprint rivals AT&T (T) and Verizon Wireless (VZ) each added subscribers during the second quarter–1.4 million and 1.1 million, respectively. So if the Pre did anything for Sprint, it helped to stem CDMA postpaid losses a bit.

And that’s something, right? After all, there’s no panacea for Sprint’s affliction–well, perhaps there is, but it’s locked up in an exclusivity agreement with AT&T (T). Still, when Sprint last reported earnings, CEO Dan Hesse said the carrier expected to sign up more new customers as the Pre gained wider distribution through retail outlets like Best Buy (BBY) and RadioShack. And that doesn’t really seemed to have happened. Perhaps next quarter after Sprint launches the Pre’s not-quite-cheaper sibling, the Pixi.

UPDATE: A quick addendum. In a research note this morning, Bernstein Research analyst Craig Moffett notes that while Sprint has reduced subscriber losses a bit, the cost of doing so has been worrisomely high.

“Yes, net subscriber losses were better,” Moffet explains. “But the cost was very high. Post-paid equipment subsidies soared to $139 per subsidized subscriber in Q3 (up 39 percent from last year), as the company recovered just 36 percent of their equipment costs….Yesterday’s results illustrate why it may not be possible for Sprint to have its cake and eat it too. After all the drastic cost cutting, after all the efforts to refresh the product line, after all the price cuts and new pricing plans, Sprint was able to manage only a modest improvement. Not growth, just a slightly slower rate of decline. And that Herculean effort almost broke the bank. The huge costs of even marginally improving gross additions (and the rate of net subscriber loss) crushed margins.”

Reporting a wider third-quarter loss than expected this morning, Sprint (S) said it lost 545,000 wireless customers and 801,000 more in the crucial postpaid category. That’s well below what analysts had feared, but brutal nonetheless. Even more so considering that AT&T (T) and Verizon Wireless (VZ) added two million and 1.2 million total customers respectively during their latest quarters.

As I said earlier this year, Sprint is hemorrhaging subscribers like Dan Ackroyd’s exsanguinating Julia Child. And it continues to do so. The company’s churn rate, or the measure of subscribers dropping service, was 2.17 percent, up from 2.05 percent in the second quarter. Alarming, to say the least, though as the charts below (click to enlarge) indicate, the bleeding is slowing a bit.

And what of Sprint’s financial performance for the quarter? Well, put it this way: The company lost nearly half a billion dollars. For the three months ending Sept. 30, Sprint lost $478 million, or 17 cents a share. This compares with a loss of $326 million, or 11 cents a share, during the same period in 2008.

Analysts had been expecting a loss of 21 cents a share for the quarter. Revenue was $8.04 billion, down nine percent from $8.82 billion last year and below consensus estimates of $8.09 billion for the quarter.

In other words, another tough quarter for Sprint. Said Bernstein analyst Craig Moffett: “The results illustrate the enormous challenge facing Sprint. Many of the cost cuts have already been taken. Their best exclusive handset has been deployed. And still, the rock rolls downhill.”

“This is a decision that is exclusively in Apple’s court,” said Seidenberg. “Obviously we would be interested if they thought it would make sense for them to have us as a partner. And so we will leave it with them on that score….We want to broaden the base of choice for customers, and hopefully along the way, Apple, as well as others, will decide to jump on the bandwagon.”

Not the most aggressive price considering that Amazon (AMZN) is currently offering the Pre, the Pixi’s elder, more robust sibling, for $99 (see image below; click to enlarge) with a two-year contract as well. Remember, the Pixi has a slower processor and a smaller screen than the Pre. And it doesn’t support Wi-Fi. Has some neat back covers though!

Worse, Pixi requires $200 to get out the door, and statistically speaking, there will be quite a few people who will fail to cash in that second $100 rebate. As I noted back when the Pre launched with a similar rebate program, redemption rates for offers like these typically run around 58 percent, thanks to customers who either find the process too cumbersome or forget about it entirely.

This can end up being quite lucrative for the issuing company. Consider this: In 2004, TiVo (TIVO) promised customers a $100 mail-in rebate within six to eight weeks of the purchase of a new DVR. About 50,000 of the 104,000 eligible for that offer failed to take advantage of it. That saved TiVo about $5 million.

PREVIOUSLY:

• Palm Pre: $199 After a $100 Rebate We Hope You Lose

Analysts polled by Thomson Reuters had been expecting earnings of 59 cents on revenue of $27.17 billion at Verizon (VZ). Excluding one-time costs, the company reported a profit of 60 cents a share on revenue of $27.3 billion. That’s a 10 percent decline year-over-year, but still better than expected. (See chart below; click to enlarge.)

Wireless subscription gains, though they trailed AT&T’s (T) iPhone-bolstered numbers, were impressive nonetheless. Verizon added 1.2 million wireless customers during the quarter, raising its total count to 89 million. That’s not the two million AT&T added, but it certainly demonstrates that the absence of the Apple (AAPL) iPhone from Verizon’s handset lineup isn’t holding the carrier back all that much.

Verizon also added 198,000 net new customers for FiOS Internet and 191,000 for FiOS TV service.

“Verizon continues to generate strong cash flow, which we have used in building the foundation for sustainable, long-term shareowner value,” Verizon CEO Ivan Seidenberg said in a statement. “Even through the worst of the recession, we have continued to raise our dividend and to add new customers, expand markets and grow revenues based on the power and innovation of Verizon’s wireless, broadband and global networks.”

“It appears that Amazon is gaining share the old-fashioned way,” ThinkEquity analyst Ed Weller noted last week, “by acquiring more and more customers…and selling more to each of them.” And judging from the nice gain in third-quarter earnings the company posted after Thursday’s closing bell, that would seem to be the case.

Net income for the period surged 69 percent thanks to a strong increase in sales. Analysts had been looking for earnings of 33 cents a share on revenue of $5.02 billion for the quarter. Amazon (AMZN) reported 45 cents a share, compared with 27 cents a share for the same period the previous year. Revenue rose 28 percent to $5.45 billion.

Once again, it seems Amazon has not broken out Kindle sales numbers in its report, though CEO Jeff Bezos did stress them in an earnings release. Said Bezos: “Kindle has become the #1 bestselling item by both unit sales and dollars–not just in our electronics store but across all product categories on Amazon.com. It’s also the most wished for and the most gifted. We are grateful for and energized by this customer response.”

Looking ahead to the key fourth quarter, Amazon is calling for revenue in the range of $8.125 billion to $9.125 billion. Analysts have been forecasting revenue of $8.13 billion. Given that the upcoming quarter includes the annual holiday shopping binge, Amazon may be looking at another blowout quarter.

Shares in the company are spiking on the news, up over nine percent to $101.90 as I write this.

“On the new online Microsoft Store, we’ve added a bunch of new products, including Windows 7 PCs as well as select 3rd party software and accessories,” Trevin Chow, senior lead program manager for Microsoft Store, said in a blog post announcing the move. “And let’s not forget a ton of gaming products that have been added including a bunch of the top selling Xbox 360 titles.”

Interesting. Not exactly sure what the upside is to selling PCs online when you don’t make them. It’s not like Microsoft (MSFT) will be offering a better experience than, say, Best Buy (BBY), HP (HPQ) or Dell (DELL). And an online outlet doesn’t afford the company the same opportunity to cultivate the “Microsoft Experience” it’s clearly going for in its brick-and-mortar outlets. So why bother?

A unified experience online and off, I suppose. And, if the infrastructure is in place to sell through one channel, why not sell through both? Of course, the downside is that if you don’t execute well, you risk giving customers another lousy experience with which to associate your products.

Pretty damn badly.

Posting third-quarter earnings that topped Wall Street expectations this morning, AT&T (T) said it activated a record 3.2 million iPhones during the period (not surprising given Apple’s blowout quarter).

Of those, 40 percent were for customers new to the carrier. That’s quite a bit more than Wall Street expected, and this surge did much to balance continued weakness in AT&T’s wireline business (click on slide below to enlarge). In fact, if that 40 percent metric is accurate, then Apple’s (AAPL) iPhone single-handedly generated an astonishing 92 percent of AT&T’s post-paid subscriber growth.

“We delivered a terrific wireless quarter, IP data growth was strong and execution across the business continues to be solid,” AT&T CEO Randall Stephenson said in an earnings release, and indeed, that would seem to be the case.

Wireless data-services revenue spiked 34 percent. And revenue from the wireless segment overall increased 8.2 percent as profit grew 41 percent. Wireless turnover rate fell to a record low of 1.4 percent.

Meanwhile, wireline revenue fell 7.1 percent, profit 30 percent.

So in the end, AT&T posted earnings of $3.2 billion, or 54 cents a share, down from $3.23 billion, or 55 cents a share, a year earlier. Revenue slipped 1.6 percent to $30.86 billion. Analysts polled by Thomson Reuters expected per-share earnings of 50 cents on revenue of $30.88 billion.

At $26.86, shares of AT&T are up about 3.5 percent in early morning trading.