The Mobile Technology Weblog

Apple iPhone: AT&T’s Bread and Butter

AT&T dumped a mixed bag of news on the industry at the end of the first month of 2009 by reporting a 24 percent fall in fourth quarter earnings despite strong wireless sales, due to high costs of supporting Apple's popular iPhone 3G.

Of course with AT&T the term "dropped" still means big bucks as we're talking about earnings of $2.4 billion in the last three months of 2008. That was down from $3.14 billion a year earlier.

News of smaller profit margins comes with the seemingly contradictory announcement of AT&T having added 2.1 million new wireless subscribers in the same period (ending the quarter with 77 million subscribers).

So how is it that a company can be gaining subscribers but making less in the process? The answer is that the majority of customers came on board to sport Apple's iPhone 3G, for which AT&T just so happens to be the exclusive US carrier. The company added 1.9 million iPhone subscribers in the quarter, down from 2.4 million in the third quarter, when the latest iPhone model was released. Around 40 percent of those signing up for the iPhone were new to AT&T.

AT&T pays hundreds of dollars in subsidies for the right to be the sole U.S. carrier for the iPhone. The company has said the iPhone subsides are worthwhile as the popular phone attracts new, higher-spending customers. Don't feel overly sorry for AT&T, however, as the company aims to make that money back in service fees over the two-year contract attached to each mobile phone.

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