Before you read too much into AT&T's iPhone activations...

Before you read too much into AT&T's iPhone activations...

Summary: AT&T reported its second quarter earnings on Tuesday and the headline grabber appears to be the fact that Ma Bell activated 146,000 iPhone subscribers in two days. But there are a few caveats before the "iPhone is disappointing" chorus gets going.


AT&T reported its second quarter earnings on Tuesday and the headline grabber appears to be the fact that Ma Bell activated 146,000 iPhone subscribers in two days.

But there are a few caveats before the "iPhone is disappointing" chorus gets going.

For starters, AT&T's activations account for only two days before the June 30 end of the quarter. Also consider that AT&T only reported activations--not sales of iPhones. Meanwhile, if you recall AT&T had a bear of a time getting iPhones activated. Folks bought their iPhones and waited--or had to wait--days to activate. Those days matter when you have two days to go before the end of a quarter.

It's unclear how many activations missed the second quarter cut. For its part, AT&T noted "sales of the iPhone continue to be strong in July with store traffic above historical levels."

Bottom line: Before calling the iPhone (blog focus) a bomb it makes sense to reserve judgment until Apple reports its earnings tomorrow. Another consideration: Depending on Apple's revenue sharing deal with Ma Bell Steve Jobs & Co. is making out just fine. The AT&T consternation may look silly when Apple reports to-date iPhone sales figures.

But let's not obsess with the iPhone. AT&T is much larger than that. A few observations:

  • Aided by the BellSouth acquisition, AT&T reported second quarter revenue of $29.5 billion, up from $15.8 billion a year ago. Net income was $2.9 billion. Wall Street estimates are a bit of a wash given the new, bulked up AT&T.
  • AT&T reported "substantially improved trends in enterprise services." Enterprise revenue was $4.8 billion, up 2 percent from the first quarter, but down 2.1 percent a year ago. So how do you get "improved trends" out of those sales? Enterprise revenue didn't decline.
  • Wireless subscribers came in at 64.7 million. Wireless revenue was up 12.7 percent to $10.4 billion. Wireless data revenue was up 67 percent to $1.7 billion. Churn in the wireless business was 1.2 percent, down from 1.5 percent a year earlier.
  • Ma Bell said that its U-verse initiative--think FiOS rival--are in line with expectations. AT&T had 51,000 U-verse video subscribers, up from 13,000 three months ago.
  • The company said the AT&T-BellSouth integration plans are on track and it saved $1.9 billion in the first half of 2007.

Topics: iPhone, Mobility, Networking, AT&T, Wi-Fi

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  • Well said...

    having worked at that august company (at&t) for better than 10 years in the past, I am amazed that they can get a report of what they have done for two days in less than 30 days after the event. Not a bad company... but staid in its culture and turn around times.

    We will have time to see how this impacts Apple and at&t before year end. Not everything occurs in a quarter chunk with a bow around it despite the whinings of press corps and financial pundits. Please note it is now "at&t"... caps were removed shortly after the decision was made that "AT&T" did not really stand for anything, as in "American Telephone and Telegraph". So as not to irritate the global market place that dislikes Americans - apparently disliking only us and our stuff - as they seem to like our ca$h.

    BTW no iPhone at this house as of yet... but XMAS is coming.
    • This isn't the at&t of old...

      This is SBC renamed to "at&t".
      Uber Dweeb
      • More AT&T than at&t...

        take a look at this, written before Bellsouth got absorbed.
  • Isn't that new subscribers

    That's 146,000 new subscribers. I don't think that number includes those with
    previous AT&T accounts who simply switched handsets. I seem to remember a story
    out of AT&T in early July that reported that they had reached the 1 Million activations
    mark. I'll try to find that story.
    Len Rooney
  • Buying And Use Experience

    I bought an iPhone the night they were released. I did NOT stand in line. Seeing
    approximately 300 people waiting to get in the Apple Store, I chose to have dinner
    instead. When I returned an hour later, the line was gone. Thinking they had sold
    out, I asked a service rep how quickly they had run out and he said they still had
    plenty of both products so I opted for the 8 gig model ( for just a hundred bucks
    more, I'd be crazy not to.)

    The next morning I went to activate the iPhone. Maybe because I was already a
    Cingular customer, the process was accomplished in about three minutes. It took
    more time to download the iTunes and OS X upgrade than it took to activate.

    My first real experience with the iPhone was later that evening. My family was
    going out for dinner with my wife's brother and we couldn't locate the restaurant. I
    googled the restaurant web page and pulled up a map. What is startling about this
    is at the time I was on Lower Wacker Drive in Chicago, under tons of steel on
    concrete. The connection was very quick.

    Since then, I have traveled extensively and everyone who sees the iPhone asks
    about it and wants to try it out. Nothing sells the iPhone like playing with it.

    Initially, my wife said, "That's a lot to pay for a phone." My response is that it's not
    just a phone; it's a computer in my pocket.

    As a disclaimer, I do hold shares of Apple stock purchased before Jobs returned at
    a price of $17. Since then, the shares have split two for one twice.
  • Didn't we hear that the activation problem was relatively minor?

    Now we're hearing that it was more substantial than first thought? Considerably more substantial given that the iPhone sold at a rate of 166K per day that first weekend (assuming sales of 500K). So what I'm hearing is that over half of those sales resulted in no or problematic activation? That's pretty damn poor if you ask me.

    And no, I don't want to see Jobs and Co fail. I just lost $8.81/share today due to this overreaction.
    • The drop of $8.81 merely...

      puts the stock price back where it was 10 days ago.

      After hours, it's up $1.50.
    • Well, you've made your money back. N/M

  • That's right

    After 7 months of non-stop foreplay from the tech media, we'd hate for there to be any negative vibe (even if it's just temporary) regarding the iPhone. ;)

    Seriously though, I agree it's way too short a time period to base any longterm expectations. The iPod started off much the same way by not meeting analyst sales expectations. Ironically, the fact that this particular stat didn't reach analyst expectations just goes to show that analysts are just as susceptible to being ill-informed and buying into the hype as the rest of us. They did the same thing with Yahoo when Yahoo launched it's new Panama ad platform. Yes, the platform is a massive improvement over their previous ad platform. But the ad platform can't change their search marketshare position (users don't come to a site because of the ad platform.) Yet for some reason, a lot of analysts and tech media somehow expected that would be the case and Yahoo took another PR/stock hit as a result.

    It's funny though how when any negative headline is associated with Apple that a lot of folks in the tech media always tells us to take a step back and let things play out first. We saw it with the slow sales of the Apple TV and we're seeing it pop up all over the web today in response to this particular bit of news. Where was this same wait-and-see attitude when it comes to negative press for other companies like Yahoo (as cited above) or Microsoft? Vista has been almost universally lambasted with every negative story on it quickly getting coverage. Yet it continues to sell extremely well in spite of all the knocks and disproportionate coverage of stories on things like vendors asking for more XP sales and Dell offering Linux. Everytime Microsoft announces stellar earnings and sales there's an immediate rush to pigeonhole the data to look for the negative rather than looking at the big picture.

    For the record, I'm not 'hating' on the iPhone. I think it's an uber-slick device and if Verizon had it or something comparable I'd probably be all over it. I'm just amazed by the benefit of the doubt Apple always seems to get even in the face of negative news (and I'm not hating on Larry either, this just happens to be the most recent article like this I've read and I've usually commented more here.) Apple can still be a great company without any additional help.