AT&T reports declining profit, iPhone-fueled wireless growth

AT&T's biggest problem?  There are no more new-to-wireless customers out there.  Everyone has a cellphone and most people who are going to get data plans already have them.  Especially in this economy.  There is very little room for growth in this area.

But AT&Ts standout weapon against the other carriers is Apple's iPhone.  According to the New York Times:

The company reported a net gain of 1.2 million wireless subscribers and 875,000 consumers under contract, up 24.1 percent from the period a year earlier. AT&T also reported 1.6 million iPhone activations in quarter, more than 40 percent of which were for customers new to the company. The company faced declines in its wireline business.

That means 640,000 users switched carriers to AT&T for the iPhone.  That is more than half of AT&T's net gain in subscribers and, assuming almost all iPhone users are under two year contract, close to 80% of new contracts were for iPhones.  That is assuming AT&T broke even with its other handhelds, which it likely didn't.


The big question for Apple and AT&T is how long can this relationship last?  Apple is under intense pressure from iPhone fans that live outside of AT&T coverage (or people that have outstanding issues with AT&T and its service) to let the iPhone work on other carriers.  I fall into this group.

Hope is not lost for those of us who would enjoy a truly opened iPhone. recently advertised unlocked iPhones that would work on any GSM carrier in the world, including Tmobile in the US.

AT&T needs the iPhone, but does Apple need AT&T?  Cupertino obviously must be getting a pretty sweet deal from the carrier to sign up for multi-year deals that have been reported.  Also, Apple likes to keep it simple.  Creating an iPhone that worked on Verizon and Sprint would require some new hardware to be built and some more backend wrangling for visual voicemail to work.

I'd like to see Apple release an iPod with all of the functionality of the iPhone including 3G wireless data -  except voice.  VoIP software makers like Skype and Vonage could get their product working on the iPod and Apple's customers could be carrier agnostic.  With data plans running about $60/month, this would be all I really need.

AT&T would likely take a big hit on this, which is why they've banned Skype iPhone calls on their network.  Why just the iPhone?   You can make Skype calls on their laptop data plans or on other AT&T wireless devices, like Windows Mobile and Symbian phones.

The ban is to recoup the high prices that Apple has to charge AT&T to pay for the subsidy that they've put on the iPhone.  Most estimates say that AT&T pays for $400 of the iPhone's cost.

What does this all mean?  That iPhone customers are likely to be stuck on AT&T for awhile longer.  I'm hoping to see a 3G iPod touch in August however.

Copyright © 2009 IDG Communications, Inc.

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