AT&T: iPhone Exclusivity Or Not, We’re Doing Fine

For one quarter, it doesn't seem like losing iPhone exclusivity will have a damaging impact on AT&T's financials.

The wireless service provider announced a 39 percent jump in profit for the quarter. It went from $2.5 billion, or $0.41 per share, in the first quarter of 2010 to $3.4 billion, or $0.57 per diluted share in the first quarter of this year. More importantly, in the first full quarter since the iPhone was available to Verizon subscribers, the company added 62,000 post-paid wireless customers, when most Wall St. analysts had predicted it would lose at least 100,000.

We knew that with another carrier offering the iPhone for the first time, there was the possibility that our business would be volatile. The results show our strategy is working, Chief Financial Officer Rick Lindner said during the conference call announcing the results. We entered this quarter with some questions and uncertainty. Hopefully, we answered those questions.

AT&T also said it activated 3.6 million iPhones during the quarter. Ralph de la Vega, the company's president and CEO of AT&T's mobile division, said the number of iPhone customers who left was actually the same as it was a year ago. AT&T is also confident that the good result isn't temporary and due to people not able to get out of their contracts. The fact is it was well-known for months and quarters in advance that another carrier would launch the iPhone, he said.

The wireless provider also said it was getting traction from other smartphones. In the past six months sales of Android devices have more than doubled, while they have seen increases for BlackBerries and Windows Phone 7 devices as well.

Analysts were pleased with the results overall. We are encouraged that wireless subscriber growth exceeded expectations despite the loss of iPhone exclusivity in the quarter, Michael Nelson, an analyst with Mizuho Securities, said in a research note.

In other news, AT&T said it was planning on launching 4G service in the middle of the year. De la Vega said they already have a number of handsets ready.

AT&T's shares were actually down 0.58 percent Wednesday, or 18 cents, because of smaller profit margins since smartphones cost more to make. Verizon's shares were up 0.46 percent in anticipation of its own earnings announcement on Thursday.