Gene Munster, an analyst at Piper Jaffray is predicting that AT&T (NYSE: T) will lose its iPhone exclusivity by the end of 2010. But whether Munster is at all on the right track, most are making the assumption that without the holy grail of smartphones, AT&T will be rendered “impotent and insolvent,” as TechCrunch reports today.
But I propose we put Munster’s fancy guess work in the context of a story in the WSJ, which asks “Did AT&T get a sour apple when it snagged the iPhone?” The story goes on to list all the reasons why the iPhone hasn’t been as big of a hit for AT&T as everyone assumes. (Not that AT&T would never admit to this, and is still fighting to lengthen its hold on the device.)
Here, let’s count the ways:
— Not so many iPhone net adds: While AT&T has disclosed at least 10 million activations of iPhones since it became available in mid-2007, most of those customers were already with AT&T. So in affect, AT&T has only gained four million new customers.
— High subsidies: AT&T’s revenues have increased 4.7 percent since 2007, but that’s offset by the estimated $400 subsidy. Doing the math, an iPhone customer brings in about $2,000 of revenue over a two-year contract, after the subsidy.
— Operating profits lower: AT&T says operating income before depreciation and amortization, as a percentage of service revenue, has dropped from 41.2% in the second quarter of 2008, before the subsidy began, and has ranged between 33.5% and 40.9% ever since. AT&T has said repeatedly it expects the margin to rise to the mid-40s long term.
— Network and image problems: The iPhone has also impacted the company’s reputation because the users download two to four times as much data as typical smartphone users and have clogged the network. AT&T’s capital expenditures will rise as it upgrades its network.

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