AT&T Mobility (T) reported a slowdown in new activations on its network during the third quarter, with non-traditional devices and resale partners taking up much of the slack from a dip in revenue-rich iPhone activations.
The carrier said it added 2.1 million net connections during the quarter, pushing it total base to more than 100 million connections. While the results fell short of the more than 2.6 million connections added during the third quarter of 2010, they were ahead of most analysts’ estimates.
AT&T Mobility noted the growth included just over 1 million “connected devices,” 473,000 net additions through its reseller partners, 319,000 direct postpaid net additions and 293,000 direct prepaid net additions. The only sector to post a year-over-year increase was its resale net additions, which was up 16.5%, while postpaid net additions dropped a significant 57.2%.
AT&T Mobility ended the quarter with 68.6 million direct postpaid customers, nearly 7.1 million direct prepaid subscribers, 13 million connections on its network though resale partners and 12 million “connected devices.”
Despite the near across-the-board slowdown, AT&T Mobility did report a dip in customer churn from 1.32% during Q3 2010, to 1.28% this year. Postpaid churn ticked up very slightly year-over-year to 1.15%, but was at 1.11% for the quarter with the theoretical removal of the impacts from integrating assets from Alltel Wireless and Centennial.
Impacting postpaid growth was a drop in iPhone activations during the quarter, which came in at an 18-month low of 2.7 million new activations during the quarter. Analysts noted the shortfall was attributed to Apple’s impending launch of the iPhone 4S during the first week of Q4, which impacted sales of the iPhone 4 during Q3. This pent-up demand was also evident as AT&T Mobility claims it activated 1 million iPhone 4S models within the first five days of launch, representing its most successful iPhone launch in history.
Beyond the iPhone dip, AT&T Mobility did report that it sold a total of 4.8 million smartphones during Q3, representing two-thirds of total postpaid device sales. The carrier noted that 52.6% of its postpaid customer base were now using smartphones.
The slowdown in iPhone sales also seemed to have bolstered the company’s wireless earnings before interest, taxes, depreciation and amortization margins, which ticked up to 43.7% for the quarter and was well ahead of forecasts. Analysts have noted that strong iPhone sales have typically impacted this metric as the carrier is forced to fork out more in device subsidies.
Overall wireless revenues increased 2.8% year-over-year to $15.6 billion during the quarter, though AT&T’s overall revenues slipped .3% to $31.5 billion due to slowing wireline operations. A steep increase in income taxes pushed AT&T’s net income down more than 70% to $3.6 billion for the quarter. Wireless revenues accounted for 49.5% of AT&T’s total revenues for the quarter, which was an increase from the 48% during the third quarter of 2010.
AT&T Mobility reported that non-voice revenues increased 18% to $5.6 billion during the third quarter compared with the same period in 2010. Postpaid average revenue per user increased 1.4% to $63.69, which was just short of expectations, with postpaid non-voice ARPU surging 14.2% to $25.14.
AT&T also reported that capital expenditures across its entire operations were down 1.8% year-over-year during the third quarter to just over $5.2 billion, but remain up 11% for the year at $14.6 billion.
AT&T said it ended the quarter with 256,210 employees, which was a 4.3% drop compared with last year.
AT&T Mobility rival Verizon Wireless is scheduled to release Q3 results tomorrow. Analysts are expecting the domestic industry’s No. 1 player to also post a year-over-year decline in net customer additions, though most expect the carrier to post an industry-leading 1 million postpaid net additions.
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