AT&T Inc. more or less left the marketing of the iPhone up to Apple Inc. until the Christmas rush, when it added an iPhone ad as its splash page on the Web site. In fact, for most of the iPhone era, it was possible to forget that AT&T was the carrier for the device in the first place. It begs the question: Does AT&T really want to sell the iPhone? And should it?
Well, the answer to the first query is yes. AT&T’s fourth quarter revenue increased 2.4 percent to $31.1 billion on the back of its wireless gains, which can be squarely attributed to the iPhone phenomenon. AT&T activated 1.9 million iPhones in the fourth quarter (40 percent of them new customers) at an ARPU that is 60 percent higher than the typical user.
“The success of our iPhone 3G launch has driven wireless growth and helped redefine the wireless data space,” said CEO Randall Stephenson in a statement.
No company in its right mind would turn down the brand equity, market differentiation and quality subscriber statistics like the iPhone brings to the table – churn among iPhone users is significantly lower than for other segments, for instance. On the other hand, there’s a clear inflection point between the cost of taking in and supporting the device, and the financial benefits of adding new subscribers.
In fact, AT&T overall has taken a profit hit: Quarterly net income has declined 23 percent year over year. One reason could be that it pays Apple between $288 to $432 per two-year contract, according to the Silicon Valley Insider. The carrier also spent $450 million last quarter for 3G upgrades to accommodate the fact that wireless data use, driven by the iPhone, is up 51.2 percent year to year. Sometimes the hockey stick is not a good thing, after all.
So the answer to the second query is that the iPhone is a mixed blessing, one could say. As a carrier it’s necessary to consider the financials as well as the soft benefits that are harder to quantify when it comes to exclusive devices. Mobility is the future; the iPhone is a vanguard device in that revolution. It’s incredibly important for AT&T, with its ongoing landline losses, to shift with the times and to be seen doing so. But the less glittering reality is that the aforementioned inflection point is a moving target, with the worldwide device market set to grow at a lesser clip this year than in 2008.
One thing we know: the iPhone has been great for Apple.
