The iPhone not only helped boost wireless data revenue by nearly $1 billion in the quarter, it salvaged what would have been a dismal subscriber performance among non-iPhone customers. AT&T activated 2.7 million iPhones in the first quarter with about a third of those customers switching from another carrier to AT&T to get the phone. However, the company added a mere 512,000 postpaid or contract customers, below analysts' estimates. This was the second quarter in a row where non-iPhone users have marked a decline. Is it time for Ma Bell to panic about a future without Apple iPhone exclusivity -- and with the prospects of a Verizon iPhone? Not just yet. Consider these two developments:
"It was a very strong quarter for AT&T," says Nielsen analyst Roger Entner, referring to the broad improvements in nearly every wireless category from margins -- up two percentage points to 44.5% -- to average sales per postpaid user, which jumped 4% to $61.89. It's no secret that the iPhone has been a key to AT&T's wireless performance. One thing that stands out, says Entner, is that demand for the iPhone 3GS has not yet reached a plateau like the previous iPhone did two quarters after its introduction. "It goes up, and up and up," says Entner. That pattern will likely continue when Apple and AT&T announce a new iPhone and cut the 3GS to $100 like they did last year with the 3G phone when the 3GS arrived.
"The precedent was established when they cut the price in half last year," says Entner. At $100, the popular iPhone undercuts archrivals like Google ( GOOG) Android phones by half. Not a bad weapon in the great smartphone challenge of 2010. AT&T's Apple iPhone exclusive may vanish next year, but for now it's making all the difference. --Written by Scott Moritz in New York.