AT&T (T): The Consumer Can Still Afford A Phone

AT&T (T) posted strong results. The company thanked Apple (AAPL) because the iPhone helped drive the telecom company’s wireless results.

Perhaps the most astonishing part of AT&T’s numbers was that people were not just buying cell phones, they were using them for things other than voice communication at a frighteningly improving pace. If use of handsets causes brain cancer, the funeral parlors will be full to overflowing next year. Use of wireless phones for things like e-mail and texting grew over 50% to $2.7 billion. At that rate AT&T will not have to be in any other businesses to be the largest phone company in the world.

What was more encouraging was how well AT&T’s other units did.

For the quarter ended Sept. 30, 2008, AT&T’s consolidated revenues totaled $31.3 billion, up 4.0 percent versus reported results in the year-earlier quarter. Consolidated revenue growth was driven by 15.4 percent growth in wireless revenues and a 16.2 percent increase in wireline IP data revenues, which includes AT&T U-verse services and business offerings such as VPNs, managed Internet services and hosting

Wireline results were weak, but that was expensive. No one uses the old style phone anymore.

AT&T’s reported third-quarter 2008 net income totaled $3.2 billion, up from $3.1 billion in the year-earlier quarter, and reported earnings per diluted share totaled $0.55, up from $0.50 in the third quarter of 2007.

In the third quarter, AT&T posted the largest postpaid net subscriber gain for any quarter in its history. Retail postpaid net subscriber additions of 1.7 million were up nearly 40 percent versus results in the year-earlier third quarter and accounted for more than 85 percent of AT&T’s 2.0 million total wireless net adds

AT&T’s wireless data revenues grew 50.5 percent versus the year-earlier quarter to $2.7 billion, reflecting strong increases in areas such as Internet access, messaging, e-mail and related services.

AT&T further accelerated its ramp in U-verse TV growth with a net gain of 232,000 subscribers in the third quarter, up from 170,000 added in the second quarter of this year. At the end of the quarter, subscribers to the company’s next-generation, IP-based TV service totaled 781,000, on a trajectory to exceed its target of more than 1 million U-verse TV subscribers by year-end 2008

Douglas A. McIntyre