AT&T profit dips due to recession, but sales of Apple iPhone remain strong

“AT&T Inc. on Wednesday said first-quarter profit fell 9.7% owing to pension and other onetime costs, but the carrier also activated 1.6 million iPhones in the first three months of the year,” Jeffry Bartash reports for MarketWatch.

“Although AT&T has weathered a steep U.S. recession better than most companies, sales fell from a year earlier to reflect more thrifty habits of consumer and business customers,” Bartash reports.

“Net income attributable to AT&T fell to $3.13 billion, or 53 cents a share, from $3.46 billion, or 57 cents a share, a year earlier. The latest quarter included pension and other one-time costs equaling 5 cents a share,” Bartash reports. “Revenue dipped 0.6% to $30.6 billion, slightly below expectations. Mobile sales climbed 8.8% to $12.86 billion to parry a 12.2% decline in voice-calling revenue, which totaled $8.51 billion.”

Bartash reports, “AT&T was forecast to earn an adjusted 50 cents a share on revenue of $31.12 billion, according to the average projection of analysts surveyed by FactSet Research.”

Bartash reports, “AT&T’s wireless division maintained its momentum by adding almost as many net subscribers in the first three months of 2009 as it did in the first quarter of 2008, when the economy was stronger. Mobile revenue grew to $12.86 billion from $11.83 billion… The average amount of money spent each month by a customer on an annual subscription plan was up 2% to $59.21 from a year earlier, mostly owing to the iPhone.”

“That’s why AT&T wants to extend its exclusive rights with Apple to sell the iPhone in the U.S. beyond the agreement’s expected expiration date in 2010. Owners of iPhones spend more each month than those who buy other devices. They are also less likely to cancel service,” Bartash reports.

“About 40% of the new iPhone users were pried away from rival carriers such as Sprint Nextel Corp,” Bartash reports.

“Because AT&T heavily subsidizes the upfront purchase cost of the iPhone, the large gain in customers actually hurts short-term profit margins,” Bartash reports. “In the long run, though, AT&T expects to generate higher income due to the larger monthly fees paid by iPhone customers.”

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