iPhone Subsidy Brings AT&T Huge Loss In Fourth Quarter
Phone carriers have tried to boost sales by giving significant iPhone subsidies in fourth quarter, but the strategy wasn’t worthwhile for all the players in the market. While Verizon managed to pull it out and had a raving fourth quarter, AT&T recorded a huge loss because of its iPhone subsidy program.
The Dallas – based AT&T reported a fourth quarter net loss of $6.68 billion. Behind that loss were two bad decisions the company took. First was the failed takeover of T-Mobile USA which ended in a $4 billion pretax charge, not to mention the poor relationship AT&T now has with U.S. telecom regulators. The second was the iPhone subsidy program, which despite bringing a good number of subscribers, it still places AT&T behind Verizon.
On Thursday, AT&T announced that it had managed to add 717,000 new two-year contracts subscribers in the fourth quarter and it had recorded the highest level of smartphone sales during the holiday quarter. In comparison with the same quarter in 2010, AT&T recorded an impressive boost, of 79 percent in terms of new subscribers.
AT&T sold in the quarter 7.6 million iPhones and 9.4 million smartphone overall. But most of the new iPhone activations were operated by existing subscribers. Some clients obtained the previous versions of iPhone 4S for free with a contract.
According to an AT&T press release, sales rose 3.6 percent to $32.5 billion, just barely topping the average of $32 billion estimated by analysts polled by Bloomberg. The net loss was $1.12 a share, but the wireless business pulled out revenue increased by 10 percent, to $16.7 billion, thanks to the web browsing and e-mailing services.
Although, the 2011 fourth quarter shows an evident boost since the same period two years ago, investors and the markets were not impressed. AT&T fell 2.5 percent to $29.45 a share at the close in New York trading, recording the biggest drop since August.
For 2012, AT&T plans to diminish the gap that separates it from Verizon by focusing on the 4G LTE network. Chief Financial Officer John Stephens believes that for the year, AT&T will manage to double its LTE coverage, which means about 150 million Americans will have access to the company’s network. But, as Wall Street Journal points out, that’s still 50 million fewer than Verizon Wireless today.