Apple, AT&T profits thrive thanks to iPhone
— -- AT&T, which pays Apple about $300 for every device sold, added 1.2 million wireless subscribers, ending the quarter with 78.2 million. That propelled its first-quarter profit of $3.1 billion, or 53 cents per share — topping analysts' expectations of 48 cents per share.
High-profit mobile data usage jumped 39% to $3.2 billion. Text messages more than doubled to 94 billion. The iPhone drove much of that traffic.
AT&T said it signed up 1.6 million iPhone customers in the quarter — more than 40% of them new to AT&T.
Apple had its best non-holiday quarter: a 15% jump in second-quarter profit that beat Wall Street expectations. Sales of iPhones more than doubled, to 3.79 million, from a year ago.
That helped the company earn $1.2 billion during its fiscal second quarter, or $1.33 per share. Revenue grew 9%, to $8.2 billion, easily surpassing what analysts predicted, according to a Thomson Reuters survey.
Many AT&T customers are coming from big rivals such as Verizon, which have been unable to stop the iPhone juggernaut. These customers spend about 1.6 times more a month than other customers.
Roger Entner, head of telecom research at Nielsen, says the feat is all the more impressive considering the economic climate. Many U.S. consumers are trimming spending, including splurges for wireless. The iPhone has so far proved resistant. That's despite the fact that the device costs $200 to $300 and requires users to sign a two-year contract.
The rapid influx of iPhone customers is putting pressure on AT&T's 3G networks. "That's the Catch-22," says wireless analyst Maribel Lopez, head of Lopez Research. "They have to spend a lot (for network improvements) to keep up with demand."
AT&T acknowledges the challenge, but says it isn't a problem. It plans to spend about $18 billion this year for network improvements. The bulk of that — around 80% — will go for broadband and wireless.
