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Connected Devices, Data Drive AT&T Wireless Gains

4/21/2010 01:15:42 PM Eastern
Dallas - Connected devices such as e-readers and alarm-monitoring systems accounted for 1.1 million of the 1.9 million net new wireless subscriptions that AT&T gained in the first quarter, when the company activated 2.7 million iPhones.

More than a third of the iPhone activations came from consumers who churned from another carrier, helping to expand the subscriber base to 87 million at the end of the quarter, the carrier said.

Connected devices, iPhones and other data-capable cellphones equipped with touchscreens or physical QWERTY keyboards drove the carrier's first-quarter data revenues up 29.8 percent to $4.1 billion. Data revenues accounted for 32 percent of total first-quarter service revenues of $12.9 billion, which was up 10.3 percent.

In the quarter, the number of connected devices on AT&T's wireless network grew to 5.8 million, and the number of customers using 3G-equipped integrated devices, defined as phones with touchscreens or QWERTY keyboards, increased by 3.3 million to around 50 percent of AT&T's 65.1 million postpaid subscriber base. That percentage is up from 31.9 percent during the year-ago quarter.

In 3G-equipped integrated devices, AT&T activated 2.7 million iPhones in the first quarter, up from 1.6 million in the year-ago quarter. The number of activations, however, is down from 3.1 million in 2009's fourth quarter and 3.2 million in 2009's third quarter, which was the first full quarter in which the new iPhone 3G S and reduced-price iPhone 3G were available.

In previous quarters, the number of iPhone activations came in like this: more than 2.4 million in the second quarter of 2009, 1.6 million in the first quarter of 2009, 1.9 million in the fourth quarter of 2008, and 2.4 million in the third quarter of 2008.

AT&T's results, said Technology Business Research analyst Kate Price, demonstrate the industry's "continued wireless shift away from voice" to generate revenue growth and additional subscriptions. At AT&T, she said, "while the number of connected devices sold shrank sequentially in the first quarter of 2010, they made up a higher proportion of overall sales in the quarter." As new subscriber growth continues to slow, she said, "AT&T will increasingly rely on connected device sales to drive growth in 2010."

She also contended AT&T's relative weakness in postpaid subscriber gains "can be attributed to consumer expectations that AT&T's iPhone exclusivity will end in mid 2010." Apple, she said, "did AT&T no favors yesterday when it coyly suggested a significant product upgrade" in announcing its latest financial results. "Consumer anticipation of a new iPhone, possibly available through another carrier, is likely to limit existing iPhone sales in 2Q '10," she said.
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