AT&T: No longer just the iPhone carrier
Source: Roger Cheng
Smartphones such as the Motorola Atrix helped AT&T diversify its product offering after Verizon Wireless began selling the iPhone.
(Credit: Motorola)
So how did AT&T fare following Verizon Wireless' first full quarter selling the iPhone? Pretty well, actually.
The wireless business was a highlight of the company's second-quarter results, as the iPhone continued to sell at a rapid clip. More importantly, however, were the sales of the other smartphones: Android, BlackBerry, and even Windows Phone handsets. Significantly, AT&T for the first time provided some insight into how the other smartphones performed, and they fared well.
The results show AT&T's effort over the past few quarters to diversify its product lineup and get away from its disturbingly high dependence on the iPhone have paid off. That's been crucial to blunting the threat posed by Verizon, which is armed with both the iPhone and phones using a speedier 4G LTE
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Apparently, there is life after being the exclusive iPhone carrier.
So how did AT&T fare following Verizon Wireless' first full quarter selling the iPhone? Pretty well, actually.
The wireless business was a highlight of the company's second-quarter results, as the iPhone continued to sell at a rapid clip. More importantly, however, were the sales of the other smartphones: Android, BlackBerry, and even Windows Phone handsets. Significantly, AT&T for the first time provided some insight into how the other smartphones performed, and they fared well.
The results show AT&T's effort over the past few quarters to diversify its product lineup and get away from its disturbingly high dependence on the iPhone have paid off. That's been crucial to blunting the threat posed by Verizon, which is armed with both the iPhone and phones using a speedier 4G LTE network that it can dangle in front of consumers.
"They've been focused on more Android devices, and that's encouraging to see," said Todd Rosenbluth, an equity analyst at Standard & Poor's. "I think there was a lot of fear in the marketplace that they were solely dependent on the iPhone, and feared a reduction in their customer base."
Instead, the second-quarter numbers paint a promising picture for a company once known as the iPhone carrier: 40 percent of its smartphone sales came outside of the iPhone; 2.3 million non-iPhone smartphones were activated, double the number that were activated a year ago; 70 percent of people who signed up for a contract bought a smartphone; and half of its base now use such a device.
AT&T expects further adoption as it continues to drive smartphone--and not necessarily iPhone--penetration.
"We still have room to grow in this area," AT&T Chief Financial Officer John Stephens said during a conference call today.
With that said, AT&T can't yet say it could live without the iPhone. Apple's phone still contributed to a bulk of its growth, with 3.6 million activations in the quarter. Nearly a quarter of its iPhone customers were new to the carrier.
It was the primary driver for its 331,000 net new contract customers, which was ahead of Wall Street and AT&T's internal expectations.
And like Verizon, AT&T will inevitably get a boost when the next iPhone hits the market. While Apple has been mum on the specifics, the company hinted at a product transition in September.
Still, the slow decoupling between AT&T and iPhone could yield a more stable future as it leans on a number of different products to propel its growth. Moving away from the high subsidy AT&T pays Apple for each iPhone will help its margins as well, although it still pays a lower subsidy to other handset manufacturers.
AT&T began its campaign at the start of the year when, at the Consumer Electronics Show, it committed to selling a dozen Android handsets this year and showed off three. The move has allowed AT&T to hop on the Android bandwagon, which has shown explosive growth over the past year.
For instance, AT&T made a strong initial push for the Motorola Atrix, which AT&T Chief Executive Randall Stephenson opted to carry over the iPhone.
Despite weaker buzz, it also continued to support Microsoft's Windows Phone, and continues to offer the largest lineup of such smartphones. Microsoft is planning an update called Mango designed to bring a myriad of improvements to its phones.
Brooks McCorcle, senior vice president of investor relations for AT&T, said some of the company's executives use Windows Phone smartphones because of the easy access to Microsoft programs. The company doesn't break out the performance of smartphones beyond the iPhone.
The difference is also clear in how it now positions its product lineup. Go to the Web site, and you'll be greeted with a photo of the HTC Status, the first phone with an integrated Facebook button, or the Samsung Infuse.
It's ultimately unclear how successful AT&T was against Verizon, which reports its second-quarter results tomorrow morning.
What's more apparent is the iPhone is no longer the sole driver of AT&T's success.
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