Updated from 9:24 a.m. ESTTelecom giant AT&T ( T) said Wednesday that its fourth-quarter profits dropped 23% from a year earlier as the company felt the impact of iPhone 3G subsidies, storm-related costs and unfavorable foreign exchange rates. AT&T reported fourth-quarter earnings of $2.4 billion, or 41 cents a share, down 10 cents from a year earlier. Excluding charges, the company reported earnings of 64 cents, down from 71 cents in the prior-year's quarter. Analysts had estimated 65 cents, although this did not account for the impact of foreign exchange, which took 1 cent out of AT&T's earnings. The company's revenue was $31.1 billion, up 2.4% on the prior year's quarter, and essentially in line with analysts' expectations of $31.35 billion. "Despite the economic environment, we grew revenues in 2008, and I expect 2009 will be another year of overall revenue growth and solid progress for our company," said Randall Stephenson, the AT&T CEO, in a prepared statement. The company also explained that the iPhone 3G, hurricane-related expenses and foreign exchange cut its fourth-quarter earnings by 7 cents. AT&T also fell short of Wall Street's earnings target in the third-quarter, partly due to a strong performance from Apple's ( AAPL) iPhone 3G. At that time, the company's earnings took a hit from the July 11 introduction of the newest iPhone, a product for which AT&T is the exclusive authorized U.S. service provider. AT&T continues to feel the impact of the popular smartphone. As part of the iPhone subsidy agreement between the two companies, AT&T's fourth-quarter profit was lowered by about $450 million. The iPhone, however, helped drive AT&T's fourth-quarter wireless growth, with the company adding 2.1 million subscribers to reach a total customer base of 77 million, 7 million more than the same period last year.
AT&T, which competes with Verizon ( VZ), Sprint Nextel ( S) and Qwest Communications ( Q), said that it expects to deliver solid results in 2009, despite a tough economic climate. "AT&T expects to grow consolidated revenues, make significant progress in its key growth initiatives, keep an aggressive focus on cost management and continue its strong record of returning substantial value to shareowners," it said, in a statement. AT&T shares were slipping 3.6% to $25.01 in recent trading Wednesday.