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Smartphones, PC Devices Drive AT&T Q2 Gains

Dallas – AT&T activated record numbers of smartphones and branded
computing devices such as tablets and USB modems in its fiscal second quarter, according
to its earnings statement.

The carrier achieved gains when it picked up the pace in postpaid
net adds and nudged up wireless operating income after a first-quarter drop.

In smartphones, AT&T activated 5.6 million handsets in the
quarter, a 43 percent year-over-year gain to hit a second-quarter record. The
number of smartphone activations was also the third highest of any previous

Of the 5.6 million smartphone activations, 3.6 million were
iPhone activations, up 11 percent from the year-ago period despite the launch
of a Verizon iPhone earlier this year. Twenty-four percent of the iPhone activations
were from new AT&T subscribers. Nonetheless, the number of iPhone
activations was flat compared to the first quarter.

Activations of non-iPhone smartphones more than doubled in the
quarter compared with the year-ago quarter, said AT&T chief financial
officer John Stephens in an investors’ conference call.

In total, smartphones accounted for almost 70 percent of handsets
activated on a postpaid plan in the quarter, and 49.9 percent of all postpaid
subscribers at the end of the quarter were using smartphones, up from a
year-ago 35.8 percent, the company said.

The number of branded computing devices activated with cellular
service was the highest of any quarter in the past. The carrier activated
545,000 tablets, wireless modems, laptops, tethering plans, personal Wi-Fi hot
spots and other data-only devices, up from the first-quarter’s 421,000

The total number of AT&T subscribers with branded computing
devices rose to 4 million, almost double that of the year-ago quarter.

Most of the branded-computing devices activated in the quarter
were tablets, the company said. The number of tablets activated hit 377,000, up
from the first quarter’s 322,000. Only 30 percent of the tablets activated in
the second quarter were activated with postpaid service. The rest got prepaid

The number of connected devices on the AT&T network grew far
more slowly in the second quarter that in the first. These devices include
e-readers, portable navigation devices, vehicle telematics systems, and other
devices whose subscriptions are paid by third parties to AT&T.

Net new connected-device activations grew by only about 410,000
in the quarter compared to first-quarter net activations of 1.28 million. The
installed base of connected devices hit 10.99 million, up from the first
quarter’s 10.58 million and up from a year-ago 6.68 million.

Because of growth in smartphone and other data-enabled devices,
data revenues grew by $1 billion, or 23.4 percent, year over year to exceed $6.4
billion in the quarter.

Total wireless-service revenues, combining voice and data, were
up 7.4 percent to $14.2 billion compared with the year-ago quarter. Total
wireless revenues, which add handset sales, were up 9.5 percent to $15.6

Wireless operating income grew 1.9 percent to $4.2 billion,
reversing a first-quarter 5.3 percent drop.

With the steep drop-off in connected-device activations from the
first quarter, the number of net new subscriptions fell 29.9 percent to 1.095
million from the year-ago quarter and dropped 9.9 percent for the first half to
3.08 million.

As a result, AT&T’s total subscription base — including
postpaid, prepaid and reseller-activated subscriptions — grew by only 1.1 million
to 98.6 million, compared with a first-quarter gain of 1.98 million.

Nonetheless, the number of net new postpaid subscriptions —
which deliver more profits than prepaid subscriptions — accelerated in the
quarter to 331,000, up from the first quarter’s meager gain of 62,000.

Net new prepaid subscriptions were also up from the first
quarter, but net through subscriptions through the reseller channel were down
from the first quarter.