Image: AT&T
Lisa Poole  /  AP
Shoppers walk through Northshore Mall near an AT&T kiosk Oct. 20 in Peabody, Mass. AT&T Inc.'s net income dipped as revenue from traditional landlines fell faster than the company could cut costs. But in the growing wireless industry, AT&T is thriving, adding a record 3.2 million iPhones.
updated 10/22/2009 12:34:32 PM ET 2009-10-22T16:34:32

AT&T Inc.'s net income dipped as revenue from traditional landlines fell faster than the company could cut costs. But AT&T pleased investors Thursday by showing that it is thriving in the wireless business, adding a record number of data-hungry iPhones to its network.

AT&T, the country's largest telecommunications provider, said it added 2 million wireless subscribers in the third quarter, matching the pace of a year ago despite a general slowdown in industry growth because most people already have a cell phone.

Analysts had expected AT&T to add about 1.5 million wireless subscribers. The fact that it blew past these expectations bodes poorly for the other major wireless carriers, because any gains for one carrier is likely to come at the expense of others.

"I am confident that's well ahead of our peers," said Ralph de la Vega, the head of AT&T's consumer business.

AT&T is the first major telecommunications company to report for the quarter. Rival Verizon Communications Inc. reveals its results Monday.

Shares of AT&T, which is based in Dallas, were up 55 cents, or 2.1 percent, to $26.49 in midday trading.

AT&T earned $3.19 billion, or 54 cents per share, from July through September. That was down 1.2 percent from the same period a year earlier.

Analysts polled by Thomson Reuters had on average expected a profit of 50 cents per share.

AT&T's revenue fell 1.6 percent to $30.9 billion, matching analyst expectations.

Wireless generates most of AT&T's profit, while wireline is still where most of the revenue comes from. That revenue is shrinking rapidly as people switch to phone service from cable companies or give up on landlines entirely. AT&T has cut 18,000 jobs this year to save money, but it is difficult to scale back a century-old business in a cost-efficient fashion. AT&T lost 1.54 million phone lines in the third quarter.

While the overall wireless results were strong, a big reason AT&T trumped analyst expectations was that it brought in 641,000 customers on prepaid plans, rather than the generally more profitable contract-based plans. In the past, many of AT&T's prepaid customers have come through reseller Tracfone, where they pay an average of about $10 per month.

However, de la Vega said AT&T is now focusing on the "upper end" of prepaid, and is pleased with its new $60-per-month prepaid "Unlimited Talk and Text" plan. It's similar to "unlimited" offerings from Sprint Nextel Corp. and MetroPCS Communications Inc., but more expensive.

The wireless results also continued to demonstrate AT&T's reliance on Apple Inc.'s iPhone, for which it is the sole U.S. carrier. The company's big focus is on increasing revenue from data services by selling more phones that encourage e-mail use and Web surfing. It added 4.3 million such phones in the quarter, and iPhones accounted for 3.2 million of them.

Neither AT&T nor Apple have revealed how much longer their exclusive deal lasts.

Meanwhile, other carriers are trying to position their phones as worthy competitors to the iPhone. Verizon Wireless last weekend launched an ad campaign for the Droid, an upcoming phone from Motorola Inc. that runs Google Inc.'s software. The ad aggressively targets the iPhone, listing features it lacks and the Droid has.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.93%
$30K home equity loan FICO 5.20%
$75K home equity loan FICO 4.58%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.42%
13.40%
Cash Back Cards 17.92%
17.91%
Rewards Cards 17.13%
17.11%
Source: Bankrate.com