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Earnings: AT&T Q2 Profits Grow 61 Percent; Revs Rise 86.7 Percent; iPhone Sales Miss Target

By David Kaplan - Tue 24 Jul 2007 06:55 AM PST

Although there were only two days left to Q2 when Apple began selling the iPhone, that appeared to be enough to help boost profits and revenues for its exclusive carrier, AT&T (NYSE: T), which posted its ninth consecutive quarter of double-digit earnings growth. The telco’s profit rose 61.1 percent to $2.9 billion, or 47 cents a share, from $1.8 billion, or 46 cents a share. Revenues were up 29.5 billion, an 86.7 percent gain from $15.8 billion in Q206, prior to AT&T’s acquisition of BellSouth and the accompanying consolidation of wireless results.

With the June 29 launch of the iPhone, AT&T activated 146,000 iPhone subscribers, more than 40 percent of them new to AT&T. The company’s other Q2 results included:

-- Wireless service revenues grew 14.9 percent versus the year-earlier quarter to $9.5 billion.

-- Wireless data revenues increased 66.9 percent versus the year-earlier quarter to $1.7 billion – driven by strong increases in both consumer and business data usage including messaging, downloads, media bundles, laptop connectivity, smart phone connectivity and enterprise solutions. At the end of second quarter, AT&T’s wireless operations had nearly 37 million active data users, up 39 percent over the past year.

-- AT&T’s wireless service ARPU posted its best year-over-year growth in several years, the company said. Total service ARPU in Q2 was $50.63, up 3.6 percent.

-- The telco reached 63.7 million wireless subs in Q2, up 6.4 million over the past year. More to come. Earnings release | Webcast

Update: Demand for the iPhone in AT&T retail stores is up above past historical levels for other mobile products, said Rick Lindner, AT&T’s CFO, during the conference call. “It may be an understatement to say that no device in the history of the the wireless industry” has come out with more fanfare than was the case with the iPhone.” Offering a sense of how the iPhone is affecting wireless data revenues, Lindner added, “Historically, data growth has been led primarily by text messaging. But one of the thing we’re seeing the iPhone do is broaden the appeal and dramatically ratchet up expectations for a data-rich wireless experience” - which includes email, video and music. He also noted that during the quarter, the company spent a lot to promote the iPhone’s launch and AT&T expects to reap more of the benefits of its association with the device in Q3.

-- Broadband Growth: Aside from focusing on the iPhone, Lindner also said that the company believes it can strongly grow its broadband usage. “When you look at the fact that we’ve made good progress penetrating our base, still at just 35 percent on average of penetration of our primary access lines, we feel like there’s still substantial room to grow broadband. Two other things that are happening in broadband that I think are important. One is, and we’ll see how this quarter turns out when everyone reports… it looks like we’re getting 50 percent of broadband share.”

Posted in: Companies, Apple, Operators, AT&T, Money, Earnings



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