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Connected Devices, Data Drive AT&T Wireless Gains

– 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


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

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

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.