AT&T's second quarter was clearly fueled by the launch of the iPhone 3GS. That's the good news. The bad? AT&T's exposure to Apple is increasing and analysts are beginning to look ahead to the day where the iPhone isn't an exclusive.On AT&T's second quarter conference call, an analyst addressed the iPhone elephant in the room. The analyst noted that the iPhone fueled results were nice, but there's now increasing exposure to losing Apple.
CFO Richard Lindner said AT&T and Apple have agreed not to disclose plans for their exclusive pact or whether a deal will be extended in future years. However, Lindner did move to allay iPhone concerns and what happens the exclusive is history. Lindner's comments coupled with remarks by AT&T CEO Randall Stephenson indicate that the company is thinking about the post iPhone exclusive a good bit.
Lindner made the following points:
- At the end of the second quarter, AT&T had just under 9 million iPhone customers (roughly 11 percent of the company's total subscriber base). Many of those were AT&T customers previously.
- "If you look at integrated devices in total 60 percent of those integrated devices are part of family plans we have, which tend to be stickier," said Lindner.
- A third of the integrated device subscriber base is tethered to a corporate relationship or arrangement.
Add it up and Lindner said AT&T could continue to do well if the iPhone goes non-exclusive. "That should give some comfort to the stickiness of this base and the ability to maintain this base going forward. We'll always strive to have a top of the line device lineup. Network performance and quality improvements will also retain this base," said Lindner.
The points are well taken, but it's unclear whether people will buy it---especially as the Feds and rivals increasingly yap about exclusive wireless deals. The iPhone customer base is loyal to Apple not AT&T so it's reasonable to assume the carrier would lose a few customers to other carriers. The big question is how many subscribers would bolt. It's hard to foresee an instant mass exit due to contracts---and AT&T's improving churn rate shows customer satisfaction beyond the blog bellyaching.
However, AT&T's iPhone fueled quarters are going to raise the question: What happens when that exclusive disappears? The worries will get louder as AT&T moves more iPhones for the next year.