AT&T: 'We're All About Wireless'

DALLAS -- Wonder why the smoking-hot 3G Apple iPhone only costs $199, less than half the price of the original? Here's a two-word hint: Randall Stephenson.

Stephenson, who became AT&T's chairman and CEO a year ago, championed the idea of paying Apple about $300 per device, analysts estimate, to help hold down the retail cost. The subsidy, which replaces another arrangement that gave Apple a portion of iPhone service revenue, will dilute earnings through 2009, AT&T says.

On the plus side for consumers, the iPhone is now extremely affordable. At $199, the 3G iPhone costs about the same as a high-end cellphone. AT&T says it plans to offer an unsubsidized iPhone later. Cost: $599 to $699, depending on memory, putting it well beyond the reach of average wireless users.

It remains to be seen if AT&T's gamble will pay off. One thing is clear: Thanks to the iPhone, the smartphone game has changed dramatically. And so have consumer perceptions of the mobile Web, a netherworld that seemed downright hostile before the iPhone showed up.

AT&T's role in the iPhone's success could cement its place as the premier cellphone carrier in the USA. It's already helped raise AT&T's cool factor, a big deal among tweens, teens and other Web-centric customers. That's no small feat considering the brand's age — more than 120 years and counting.

The iPhone has a huge impact on carriers, which tried for years to sell consumers on the idea of wireless data, says Charles Golvin, a senior wireless analyst at Forrester. "Then Apple came along and, in a 30-second commercial, they just made it dead simple," he says. That simplicity, married to the sleek iPhone design and Web-friendly function, has energized consumers, he says. It's also raised the bar globally for carriers and established handset makers, he adds.

You'll get no argument from Stephenson. In a sit-down interview, he says the iPhone is central to what he sees as an ongoing transformation of AT&T. His goal: Turn the iconic company into a wireless goliath with global reach and intense customer loyalty.

"The iPhone has repositioned AT&T as the premier wireless brand in the world," Stephenson says. He quickly adds, for emphasis: "We're all about wireless."

And, so, apparently, is Stephenson. One of his first acts as CEO was to ask the AT&T board to approve the $2.5 billion purchase of Aloha Partners, a privately held wireless partnership. It wasn't the easiest pitch to make: Aloha had no operations, revenue or customers.

But it did have one thing Stephenson wanted badly: a hoard of national wireless licenses that could buck up AT&T's mobile Web plans. The deal was approved.