Dallas - AT&T expanded its wireless operating margin and began to grow its wireless operating income once again despite its continued heavy reliance on sales of heavily subsidized iPhones, AT&T's quarterly financial report shows.
AT&T continued to activate more iPhones than rival Verizon Wireless in the first quarter, and iPhones accounted for a larger share of AT&T's smartphone activations than Verizon smartphone activations, the report also showed.
Out of 5.5 million smartphones activated on AT&T postpaid retail plans in the quarter, 4.3 million were iPhones, or 78 percent of all smartphones activated by AT&T. That compares with the iPhone's fourth-quarter 81 percent share of AT&T smartphone activations, or 7.6 million iPhones out of 9.4 million total smartphones.
In contrast, Verizon activated more postpaid retail smartphones than AT&T at 6.3 million, but only 51 percent were iPhones.
For AT&T, smartphone activations hit a record for any first quarter and represented more than 78 percent of postpaid retail activations, close to the 82 percent posted by AT&T in the fourth quarter.
Despite its reliance on heavily subsidized iPhones, AT&T nonetheless posted an 11 percent gain in wireless operating income to $4.37 billion, compared with a fourth-quarter 27 percent drop in operating income and a mere 0.3 percent gain in all of 2011.
AT&T's wireless margin grew to 27.2 percent from a year-ago 25.8 percent and from the fourth quarter's 24.2 percent.
AT&T's wireless operating income and wireless revenues, nonetheless, grew more slowly that they did at Verizon, whose wireless operating income grew 28 percent to $5.2 billion in the quarter.
In wireless revenue, AT&T posted a gain of 5.4 percent to $16.1 billion, while Verizon's wireless revenues grew 8.2 percent to $18.3 billion.
AT&T's wireless margins improved despite the sale of heavily subsidized iPhones and smartphones, AT&T said, because of "improved operating efficiencies and further revenue gains from the company's 41 million high-quality smartphones subscribers [who pay for data plans]."
Total data revenues grew 19.9 percent to $6.1 billion, representing 38 percent of total wireless-segment revenues. Data revenues were slightly lower than Verizon's $6.61 billion, which accounted for 42.9 percent of that carrier's first-quarter wireless-segment revenues.
In other financial metrics, AT&T said:
--Seventy-eight percent of postpaid retail phones activated in the quarter were smartphones, expanding the carrier's smartphone-using postpaid retail customer base to 59.3 percent of all retail postpaid subscribers.
-- About 30 percent of retail postpaid smartphone subscribers are using 4G devices.
-- Total wireless net additions fell 63.4 percent from the year-ago quarter to 726,000 because gains in retail postpaid and retail prepaid net adds did not offset net-add declines of connected devices, such as telematics systems and e-readers, and net-add declines in activations through resellers.
--The number of retail postpaid net adds grew 202 percent to 187,000 from a year-ago 62,000, and retail prepaid net adds grew 47 percent to 125,000.
-- Net adds through resellers fell 67 percent to 184,000, while connected-device net adds fell 82 percent to 230,000 from a year-ago 1.27 million.
--The company posted its highest-ever first-quarter activations of branded-computing devices such as tablets, USB modems, portable Wi-Fi hot spots and other data-only devices, adding 460,000 in the quarter to reach 5.8 million in use. Of the 460,000 data devices sold, 240,000 were tablets, and of those, about three-quarters were activated on postpaid plans.
The report also shows that AT&T's retail postpaid and retail prepaid net adds were lower than Verizon's 501,000 postpaid retail net adds and 233,000 prepaid retail net adds.