Earnings Call: AT&T’s Dependence On iPhone Increases; Adds 2.4 Million iPhones In Q2

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AT&T (NYSE: T) activated 2.4 million iPhones during its second quarter, a majority of the subscribers likely coming in the final 11 days after the latest iPhone 3GS went on sale, at which point AT&T recorded its best online and store sales day ever.

Even though the iPhone has helped add customers and increase AT&T’s loyalty among existing subscribers, analysts are starting to wonder if AT&T has an unhealthy reliance on the iconic Apple (NSDQ: AAPL) device. Today, it has 9 million iPhone users on its network, representing about 11 percent of its nearly 80 million total subscribers.

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In addition to having a larger portion of its users on one devices, AT&T is seeing its margins fall compared to the year-ago quarter because of the hefty cost of subsidizing each one.

Commresearch analyst Gregory Lundberg estimated that excluding iPhone, 25 percent fewer people signed up for AT&T’s service in the second quarter compared with the first quarter, Reuters reports. Lundberg: “Some of that’s seasonal, some of it is the market, but it really puts a magnifying glass on the risk of using the iPhone exclusivity.”

During the company’s conference call, AT&T acknowledged that the iPhone was putting pressure on margins, but dismissed concerns about what will happen when its exclusive eventually expires (at an unknown date). AT&T’s CFO Rick Lindner said AT&T has 9 million iPhone customers today, of which 60 percent or 5.4 million, were existing customers before they bought the phone. Of those, many of them are tied to family plans or corporate accounts, making them more “sticky.” Lindner: “I hope that gives you some comfort as to the stickiness of the base and ability to maintain going forward. And, obviously we will always strive to have a robust line-up.”

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