So much for "antennagate" having any significant impact. Two days after Apple surprised Wall Street by posting a $3.25 billion quarterly profit on $15.7 billion of revenue, AT&T reported that it gained a net 1.6 million subscribers in the second quarter on the strength of a record 3.2 million iPhones activated in the quarter.
Of the 3.2 million iPhone activations, about 27 percent of those were new AT&T subscribers, the company said Thursday, helping boost its second-quarter earnings 26 percent over the same quarter last year, prompting the company to increase its outlook for the full year.
AT&T reported earnings of $4 billion for the three months ended June 30, compared with $3.2 billion in the prior year's quarter. Sales were up only a modest 0.6 percent to $30.8 billion from a year ago, though that figure excludes its business software unit, Sterling Commerce, which AT&T is in the process of selling to IBM for $1.4 billion.
The company attributed the surge in earnings, in large part, to the record iPhone activations during the quarter. Though the quarterly numbers include only a few days of sales of the new iPhone 4, AT&T added, preorders of the device were 10 times greater the first day than those for the iPhone 3GS a year earlier.
Initial iPad sales are also reflected in the second-quarter numbers. AT&T activated between 400,000 and 500,000 iPad 3G devices on its network during the quarter. Interest in the iPad from business customers was greater than expected, officials said, noting that many enterprises are looking at the device as a laptop replacement.
The net subscriber adds, which bring its total to more than 90 million, or a 13 percent increase over a year ago, reflect fewer dropped accounts as well as the iPhone luring new customers. AT&T's "churn rate" dipped to a new low of 1.29 percent from 1.48 percent in the year-earlier quarter.
"We delivered another strong quarter, with improved revenue trends, double-digit earnings growth and solid cash flow," Randall Stephenson, AT&T chief executive officer, said in a statement. "These results add to our confidence going into the second half of the year."
Other aspects of the carrier's business also contributed to its profit growth, including cost cuts and continued growth in AT&T's U-verse service -- packages of digital TV, voice, and Internet access -- which surpassed $1 billion in quarterly revenue, more than doubling revenue in second quarter 2009.But Stephenson highlighted wireless data services, specifically mobile broadband as "the industry's most powerful growth driver."