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AT&T Gains On Smartphone, Tablet Sales

Dallas – Record subscriber growth and rising data revenues from
smartphone and tablet use drove up AT&T’s 2010 wireless revenues in the
fourth quarter and full year.

AT&T posted its best-ever increase in net new wireless
subscribers in the fourth quarter of 2010 and full year, and it boosted
wireless revenues for the two respective periods by 9.9 percent to $15.2
billion and 9.3 percent to $58.5 billion.

Net subscriber additions hit 2.8 million in the fourth quarter
and 8.9 million for the full year, putting the company’s year-end subscriber
base at 95.5 million. AT&T’s subscriber base moved ahead of that of
Verizon Wireless, whose year-end subscriber base hit 94.1 million. Subscriber
gains came in all segments, including retail prepaid and postpaid activations
and activations through resellers.

Rising revenues were driven by the subscriber gains as well as by
double-digit growth in data-service revenues as more subscribers opt for
data-capable devices such as smartphones and keyboard-equipped feature phones. 

In devices, the company reported that iPhone sales slipped
sequentially to 4.1 million in the fourth quarter from the previous quarter’s
5.2 million, which was the first full quarter of sales for the new iPhone 4.
iPhone sales were nonetheless the second highest of any quarter and exceeded
fourth-quarter 2009 sales of 4.1 million. The best-ever iPhone-sales  quarter was the third quarter.

Overall fourth-quarter sales of more than 7.4 million integrated
devices, which include iPhones and other smartphones, were the second highest of
any quarter ever, said chairman/CEO Randall Stephenson.  The 
devices, defined as any phone with a QWERTY or virtual keyboard,
accounted for 80 percent of postpaid phone sales in the quarter, bringing the
percentage of the carrier’s 68 million postpaid subscribers with integrated
devices to 61 percent, up from a year-ago 46.8 percent.

In announcing sales of other data-capable devices, the carrier
said fourth-quarter sales of iPad and Galaxy tablet hit 442,000 through company-owned
outlets and the company’s website. All are equipped with 3G for use with
prepaid data plans. The carrier doesn’t sell Wi-Fi-only models through its

Tablets, said chairman/CEO Randall Stephenson, will be a
“significant driver” of revenue growth. “This thing has a lot of room to run,”
he said in an investors’ conference call.

Data usage by users of 
tablets, smartphones, and other integrated devices drove a  fourth-quarter 27.4 percent gain in data
revenues to $4.9 billion, or 35.5 percent of wireless service revenues of $13.8
billion. Service revenues exclude $1.38 billion in sales from handsets and
other hardware to end users.

Operating income from wireless slipped 3.2 percent in the quarter
to $3.47 billion as wireless margins declined to 22.9 percent from a year-ago
25.9 percent. The full-year operating income, however, rose 10.3 percent to
$15.3 billion compared with full-year 2009.

Another factor raising revenues was the continued growth in the
number of connected devices, which include e-readers, netbooks and other
devices with embedded cellular as well as cellular-equipped telematics systems.
The number of connected devices rose to 1.5 million in the quarter.
Connected-device growth is “going to accelerate as we move into 4G capabilities,”
Stephenson said.

  As for the first-quarter
outlook Stephenson said the loss of iPhone exclusivity “is going to create some
volatility” during the first part of the year and that the impact could be hard
to predict, but he said he was optimistic that AT&T’s wireless business
“will grow over the course of the year.” He pointed to an aggressive expansion
of Android phones, the addition of Windows smartphones, and BlackBerry phones
that he said are “getting traction.” AT&T is “really starting to feel good
about the network situation,” he added, referring to capacity enhancements.