AT&T posted $30.3 billion in fourth-quarter revenue, up from $15.9 billion in the year-ago quarter, which did not reflect the financial performance of AT&T's BellSouth acquisition at the tail end of 2006. AT&T's net income in 2007's year-ending quarter totaled $3.1 billion, up from $1.9 billion in the year-earlier period.
AT&T's latest financial results were driven in large part by record gains at the company's wireless division, noted AT&T CEO Randall Stephenson. "Our wireless business delivered outstanding results, with the largest quarterly subscriber gain ever posted by a U.S. provider," he said.
Subscriber Net Gains
In particular, revenue from wireless data hit the $2 billion mark in the quarter, driven by increased adoption of smartphones and 3G wireless devices.
"Data now represents 20 percent of our wireless-services revenue," said AT&T CFO Rick Lindner. Moreover, considering that only 12 percent of AT&T's wireless handsets are integrated devices, "there remains a huge upside to growth," Lindner added.
AT&T also racked up a net gain of 2.7 million wireless subscribers. "The fourth quarter includes both Christmas and Hanukkah, and therefore a lot of this growth was certainly driven by iPhone sales," noted Forrester Research Vice President Lisa Pierce.
AT&T's net gain of 300,000 subscribers in the quarter suggests that the communications giant has been able to take advantage of weakness at Sprint. "It seems that most of the subscriber growth that we've seen recently has been based on competitive wins versus really growing the size of the market," Pierce said.
Earlier this month, Sprint announced net losses of 683,000 post-paid subscribers and 202,000 traditional pre-paid users in its fourth business quarter. The struggling wireless carrier also said it would be streamlining its business in anticipation of continuing downward pressure this year on subscriber trends, revenues and profitability.
Capitalizing on the iPhone
The popularity of Apple's iPhone, an AT&T exclusive, is undoubtedly one reason why AT&T has been able to attract so many first-time subscribers. The communications giant said it gained just under 2 million iPhone customers during the last six months of 2007.
AT&T admitted that at least some iPhone buyers were unlocking the handset to use on other networks, especially those overseas. Still, Lindner called its sale of 2 million units a significant achievement since the wireless carrier can largely attribute the numbers to its own post-paid subscriber base.
Going forward, AT&T expects to continue to capitalize on its exclusive U.S. rights to distribute the iPhone in several different ways. For example, the communications giant recently announced that more than 10 million AT&T broadband subscribers will soon have free, unlimited access to its nationwide Wi-Fi network. This should prove to be an added incentive for AT&T's broadband customers to buy the iPhone, which features built-in WiFi capability.
Lindner also noted that the iPhone is poised to deliver other enhancements, such as the ability to create location maps, download movie rentals from iTunes, customized screens, and access AT&T's new electronic search service.
AT&T's decision to provide free WiFi service to its broadband customers is in part an iPhone-driven decision, Pierce thinks. The iPhone is currently tethered to EDGE technology, "which is significantly slower than HSPA," Pierce explained. "Given that problem, making the iPhone available to AT&T's WiFi hot spots is very critical, because frankly many of these apps are bandwidth-intensive."