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AT&T Rockin’ It On iPhone Sales, But Margins And Earnings Will Suffer

AT&T Rockin’ It On iPhone Sales, But Margins And Earnings Will Suffer

Despite the availability of Apple’s iPhone on several carriers, AT&T announced on Monday it was on track to hit record quarterly smartphone deliveries as more customers decided to upgrade their service. The company also noted it continues to roll-out its LTE service, the technology standard used for higher-speed 4G coverage.

AT&T sold 6 million smartphones in the first two months of the fourth quarter, putting it on track to beat its quarterly record of 6.1 million smartphone deliveries, set in Q3 2010. Greatly responsible for this surge in smartphone sales was the release of Apple’s latest iPhone.

Despite “a very competitive environment” with major competitors Verizon and Sprint carrying the coveted Apple smartphone, AT&T saw “a higher number of customers upgrading their handsets than in prior quarters, in part reflecting customers who were waiting for the new iPhone, which launched in October 2011,” read the release.

In a push to gain longer-term customers, carriers have been heavily subsidizing smartphone prices to make them more accessible to possible customers. This, in turn, hurts margins and therefore profitability. AT&T made this very clear, noting “these record smartphone sales are expected to have a near-term negative impact on margins and therefore earnings.”

It’s worth it, though, if AT&T manages to capitalize on what it believes will be “higher average revenue per user” given steady cash flows from postpaid customers and stronger data usage. On the data point, the company also reported it hit its targets on the deployment of its Long-Term Evolution service (LTE) to 15 markets.

LTE is the technology standard for next-generation 4G wireless networks. Barron’s cites AT&T CFO John Stephens, speaking at a UBS conference on Wednesday, noting the company was on track to cover 70 million POPs or potential users by the end of the year. Stephens added that AT&T currently has enough spectrum holdings to cover an estimated 80% of the data traffic to be covered by LTE by the end of 2013.

Shares in AT&T were down in the session, sliding 0.6% or 16 cents to $29.01 by 12:05 PM in New York.

[Thanks: http://www.forbes.com]

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