|AT&T reported its third-quarter results early on Thursday.|
DALLAS ( TheStreet) -- AT&T ( T), like its handset partner Apple ( AAPL), took an iPhone hit during its latest quarterly results as customers delayed their purchases ahead of the 4S launch. The no.2 telco posted otherwise solid third-quarter numbers before market open, meeting Wall Street's earnings estimate while dipping below the consensus revenue target. AT&T also added 2.1 million wireless subscribers to pass the 100 million mark.
Smartphone sales, however, were dented by Apple's decision to break with tradition and avoid a summer launch for its latest phone hardware. Instead, the gadget giant unveiled its new iPhone 4S in early October, just after the end of AT&T's fiscal third quarter. As a result, AT&T activated just 2.7 million iPhones during the quarter, down from 5.2 million in the prior year's quarter, which coincided with the launch of the iPhone 4. Bank of America Merrill Lynch had predicted third-quarter iPhone activations of 3.48 million, while BMO Capital Markets was looking for a figure of 3.3 million. Overall, AT&T sold a total of 4.8 million smartphones during the quarter. "The third quarter was slower than normal because we didn't have the iPhone refresh," explained Ralph de la Vega, CEO of AT&T's mobility and consumer markets, during a conference call on Thursday morning. Nonetheless, de la Vega expects great things from the iPhone 4S during the fourth quarter. The device, he noted, has already shattered records at AT&T, which had activated 1 million of the devices by Tuesday, just five days after it hit the shelves. "We expect blockbuster smartphone sales in the fourth quarter," he said. "We saw the early response to the new iPhone 4S - it has been incredible." The new iPhone, however, could prove something of a double-edged sword for AT&T, according to Jonathan Chaplin, a research analyst at Credit Suisse. With AT&T likely to activate 5.5 million of the devices during the fourth quarter, the cost of iPhone subsidies could weigh heavily on margins, he warned, in a note released on Thursday. As a result, Credit Suisse cut its fourth-quarter earnings estimate for AT&T to 53 cents a share earlier this week. The current average estimate of analysts surveyed by Thomson Reuters is for earnings of 58 cents a share in the December-ending period. The iPhone 4S, though, is not the only issue on AT&T's agenda at the moment. AT&T's CFO John Stephens, for example, briefly discussed the company's $39 billion attempt to acquire T-Mobile during the quarterly conference call. "The FCC review is continuing, and, on the DoJ
Department of Justice front, we're hopeful that we can reach a solution," he said. "The benefits of the combination are significant and unchanged -- our expectation continues to be that we will achieve a successful solution." Investors were largely unmoved by AT&T's third-quarter numbers, pushing the firm's shares down 1.34% to $28.70 on Thursday. -- Written by James Rogers in New York. >To follow the writer on Twitter, go to http://twitter.com/jamesjrogers. >To submit a news tip, send an email to: email@example.com