AT&T racks up iPhone activations despite Verizon competition

It seems rumors of AT&T’s demise as the top iPhone carrier were greatly exaggerated.

Although AT&T is no longer the exclusive carrier for Apple’s hugely popular smartphone, AT&T has actually boosted its total iPhone activations while maintaining the same churn rate for the device that it reported a year ago. AT&T said it activated 3.6 million iPhones in the first quarter of 2011, a 33% increase over the 2.7 million iPhones it activated in the first quarter of 2010.  AT&T also notes that 23% of iPhone activations represented new subscribers for AT&T, meaning the carrier is still attracting new users even though it no longer holds exclusivity rights for the iPhone.

AT&T’s strong iPhone numbers this past quarter should allay any fears that the company would face a mass exodus of iPhone users once rival Verizon began carrying the device.  A survey conducted by ChangeWave Research earlier this year showed that 26% of AT&T iPhone users said they planned to leave AT&T for Verizon once Verizon began offering the iPhone.  ChangeWave also found this month that 46% of users who plan to buy an iPhone in the future plan to go with Verizon while 27% of users plan to go with AT&T.

However, that same survey also found that customer satisfaction ratings for the iPhone on AT&T and Verizon were virtually identical, meaning that Verizon’s network had not yet given iPhone users a significantly better experience than AT&T’s network.  ChangeWave’s report on the survey also noted that “it remains to be seen how well the Verizon network performs as the number of Verizon iPhone 4 owners ramps up and inevitably puts more pressure on their system.”

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AT&T also had strong overall smartphone sales for the quarter as it sold more than 5.5 million smartphones, an increase of 62% over the 3.4 million smartphones it sold in the first quarter last year.  AT&T has released many high-profile devices over the past year, including the BlackBerry Torch and the Motorola Atrix 4G, with the goal of expanding its smartphone portfolio beyond the iPhone.

AT&T’s iPhone and smartphone activation numbers helped boost both its wireless revenues, as the company reported wireless service operating revenues of nearly $14 billion in the first quarter of 2011, an 8.6% increase from the $12.8 billion in wireless service operating revenues it reported in the first quarter of 2010.  The carrier’s earnings were also impressive during the quarter, as it reported a net income of $3.5 billion, or 36.5% more than the $2.5 billion net income it reported in the first quarter of 2010.

AT&T ended the quarter with 97.5 million total wireless subscribers, an increase of 12.1% from the 87 million wireless subscribers it reported a year ago.  Postpaid subscriptions, which generate significantly more revenue per user than prepaid subscriptions, account for 70% of AT&T’s total wireless subscriptions in the quarter.  The company’s wireless churn rate, or the rate at which it turns over wireless customers, remained relatively steady at 1.36%, up slightly from the 1.3% it reported in last year’s first quarter.

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