Economy and iPhone subsidies trim AT&T's 2Q profit

Jul 23, 2009 By PETER SVENSSON , AP Technology Writer
A customer walks out of an AT&T store in San Jose, Calif., Wednesday, July 22, 2009. AT&T said Thursday, July 23 its earnings fell 15 percent in the second quarter as it subsidized a record-setting launch of a new iPhone model. The weak economy also continued to sap its landline business.(AP Photo/Marcio Jose Sanchez)

(AP) -- AT&T Inc.'s earnings fell 15 percent in the second quarter as it subsidized a record-setting launch of the newest iPhone. The weak economy also continued to sap its landline business.

The profit beat Wall Street estimates, however.

The country's largest telecommunications provider said Thursday it earned $3.20 billion, or 54 cents per share, in the April to June period. That was down from $3.77 billion, or 63 cents per share, a year earlier.

Analysts polled by Thomson Reuters were expecting earnings of 51 cents per share.

Dallas-based AT&T's revenue fell 0.6 percent to $30.7 billion, matching analyst expectations.

AT&T activated more than 2.4 million iPhones in the quarter, and more than a third of those were for customers who were new to the carrier. Apple Inc. and AT&T launched a new model of the phone on June 19.

AT&T subsidizes each new iPhone by hundreds of dollars, expecting to make the money back in service fees over a two-year contract. AT&T's operating margin in wireless declined to 23.8 percent from 25.5 percent a year ago.

AT&T added a net 1.37 million wireless subscribers, a strong showing in a market that's approaching saturation, and more than analysts had expected. Together with the evident popularity of the , it could mean that AT&T has benefited at the expense of other carriers this quarter.

AT&T is the first major telecom company to post results for the season. Verizon Communications Inc. reports on Monday, followed by Sprint Nextel Corp. and Qwest Communications International Inc. on Wednesday.

AT&T ended the quarter with 79.6 million wireless subscribers, remaining in second place behind Verizon Wireless.

In pre-market trading Thursday, AT&T shares rose 66 cents, or 2.7 percent, to $25.50. While the stock held up well in the market meltdown last fall, it has failed to keep pace with the recovery this spring. It has traded between $20.90 and $33.56 over the past year.

A long-running trend continued in the second quarter as AT&T lost 921,000 residential phone lines. Households are signing up for phone service from cable TV providers or opting to rely on cell phones alone.

AT&T said its earnings were also weighed down by pension and retiree benefit expenses that were $400 million higher, or 5 cents per share, than in the same period last year.

©2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Explore further: EU Parliament votes to break up Google

add to favorites email to friend print save as pdf

Related Stories

Verizon 1st-qtr profit, revenue beat expectations

Apr 27, 2009

(AP) -- Verizon Communications Inc. said Monday its earnings grew 5 percent in the first quarter, boosted by its acquisition of Alltel Corp. and strong demand for its wireless, Internet and TV services.

AT&T earnings fall, but iPhone cushions the blow

Apr 22, 2009

(AP) -- Cost-cutting and the lure of the iPhone softened the effect of the weak economy at AT&T Inc., helping the country's biggest telecommunications carrier beat analyst estimates for the first quarter.

Texas Instruments 2Q profit falls 56 percent

Jul 20, 2009

(AP) -- Chip maker Texas Instruments says its second-quarter earnings fell 56 percent from a year ago, clipped by a weak economy that the company expects will "take some time" to strengthen.

Qwest 1Q earnings rise 37 pct after cost cuts

Apr 29, 2009

(AP) -- First-quarter earnings at Qwest Communications International Inc. rose 37 percent, as the phone company was helped by cost-cutting and strong results from its business services unit.

Recommended for you

EU Parliament votes to break up Google

Nov 27, 2014

The European Parliament voted overwhelmingly for the break-up of Google Thursday in a largely symbolic vote that nevertheless cast another blow in the four-year standoff between Brussels and the US Internet ...

Toyota finds new air bag issue, recalls more cars

Nov 27, 2014

Toyota Motor Corp. recalled more than 40,000 vehicles in Japan on Thursday as part of a worldwide scare over defective air bags and is investigating a new type of air bag problem that could lead to further recalls.

Netflix sues Yahoo CIO for alleged kickbacks

Nov 26, 2014

Netflix is suing a former company vice president who is now chief information officer at Yahoo, accusing him of receiving money from vendors he hired to work with the video streaming company.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.