Replace “Marcia” with iPhone
AT&T is reporting a boom in customer acquisition and, it seems, a bust in profits. According to a recent earnings report, the company activated 2.4 million iPhones but lost $900 million in third-quarter earnings as a result of all the data and voice blowing through Apple’s darling.
The iPhone, we see, is a double-edged sword. Because it goes out to early adopters and folks who understand mobile data, AT&T faces the same problems MVNOs like Helio faced in the U.S.: aim at heavy data users and get hit for data usage. While this is a testament to the majesty of Steve Jobs, it’s also a problem for AT&T. How can they keep making profits if they’re spending on their cash on network upgrades?
As we all know, all that data comes at a price. The high bills AT&T is sending out to 3G users attests to this and it will definitely be harder in the coming months to convince price-conscious consumers to pony up $175 or more just to get Facebook on the go.
AT&T’s third-quarter 2008 reported and adjusted margins and earnings reflect revenue growth and continued progress with previously outlined cost initiatives, offset by hurricane-related expenses and effects on wireless results from the iPhone 3G. Impacts from the company’s iPhone 3G initiative reduced pretax third-quarter earnings by approximately $900 million or $0.10 per share…
Based on third-quarter customer response, AT&T is optimistic regarding continued strong iPhone 3G activations and is confident in the long-term value created by this investment in acquiring high-value, data-centric wireless subscribers. As a result, AT&T expects its dilution associated with the iPhone 3G will run above its previous expectation, and AT&T now expects, depending on volumes, its full-year 2008 wireless service OIBDA margin to be better than 37 percent versus its previous outlook of 39 percent to 40 percent. AT&T expects its full-year adjusted consolidated operating income margin to be approximately 23 percent versus its previous outlook of approximately 24 percent.