AT&T's smartphone diversification pays off this quarter

AT&T posted its first quarter earnings for 2011 on Wednesday, and those numbers were certainly something to boast about. Specifically, it turned out to be a "record quarter for smartphone sales," despite the threat of Verizon picking up the iPhone 4. What saved AT&T?

One word: diversification. That's specifically in regards to AT&T's current smartphone offerings. The $49 iPhone 3GS bargain certainly helped, but 40% of the smartphone sales during the first quarter were made up by Android, Windows Phone 7, and BlackBerry devices. AT&T CEO and president Ralph de la Vega addressed this in the conference call:

Smartphone sales helped drive wireless data revenue growth of 24%, up nearly $1 billion year over year. We had our largest first-quarter smartphone sales ever, signing up 5.5 billion customers, both upgrades and new subscribers. The number of smartphones on our network increased by about 2.4 million in the quarter, up 9 million in the last 12 months. These results reflect another strong quarter for iPhone activations, with more than 3.6 million activated during the quarter. That's almost 1 million more than last year, with 23% of these subscribers new to AT&T. We also had a strong quarter with other smartphones, selling more than 2 million other smartphones this quarter. That's twice as many as we added in the first quarter of 2010. This was driven by BlackBerrys, Windows Phone 7 devices, and significant growth in new Android models. In fact, during the last six months, our monthly sales of Android devices have more than doubled. We still see a lot of upside here.

AT&T execs specifically cited the new HTC Inspire 4G and Motorola Atrix 4G, two impressive handsets priced on contract at $99.99 and $199.99 respectively, as products that boosted revenue per unit number significantly.

However, all of this has to be taken with a grain of salt as AT&T didn't reveal exact sales figures, so it really could just be PR spins. Additionally, these numbers seem more impressive because everyone expected AT&T to flop (for at least a quarter) after losing iPhone exclusivity. CFO Rick Lindner admitted during the call:

In terms of churn, frankly, we expected a slight uptick in churn when another carrier launched the iPhone. Our expectations, I think, were generally less -- more modest in terms of churn increase than external expectations. We believed in our broadband strategy, our wireless strategy. We felt we were prepared for changes in exclusivity, and actually, the results came in better than we expected.

Nevertheless, it was high time for AT&T to start opening up more to the Android platform, along with more BlackBerry and Windows Phone 7 options. The next iPhone model isn't expected to be announced and/or launched until September, which should make for a good holiday season for AT&T, but the carrier is going to need to rely on other smartphone makers and operating systems until then. At least AT&T is off to a good start.

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