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Apparently, AT&T Not So Bad Anymore: Churn at Less than 1%
Apparently, AT&T Not So Bad Anymore: Churn at Less than 1%

By Mark Long
July 24, 2012 2:38PM

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Some industry observers expected AT&T's iPhone sales to take a major hit in the quarter -- with subscribers postponing their purchasing decisions in anticipation of the arrival of the iPhone 5. However, Piper Jaffray believes that the release of Apple's next-generation handset will come in time to ensure that third-quarter results at AT&T won't be affected.

AT&T reported robust 18.8 percent wireless data revenue growth for the second quarter, including the carrier's lowest churn rate ever at less than 1 percent, and added 1.3 million new customers in the period.

"Record low churn and strong sales tell the story of our wireless business," AT&T CFO John Stephens told investors Tuesday. "New customers are choosing AT&T and existing ones continue to stay with us in record numbers. We have 88 percent of our subscribers on FamilyTalk or business plans."

AT&T's smartphone data revenue rose by $1 billion year-over-year to $6.4 billion. "Data revenues are now at a $25 billion annualized revenue stream, growing at almost 19 percent," Stephens said during Tuesday's conference call.

The wireless carrier sold 5.1 million smartphones during the second quarter -- including 3.7 million iPhones, of which about 22 percent represented customers new to AT&T. Moreover, smartphone subscribers overall currently account for 61.9 percent of AT&T's total postpaid base. "These are valuable customers generating revenue twice that of other [wireless] customers," said AT&T Senior Vice President Susan Johnson.

4G LTE Build Remains on Track

Piper Jaffray views AT&T's June quarter iPhone unit sales of 3.7 million as better than the investment firm's prior thinking on the U.S. markets.

"Between Verizon and AT&T, iPhone sales were down 15 percent sequentially, compared to our thinking of down 24 percent sequentially," noted Piper Jaffray analysts Gene Munster and Douglas Clinton.

Some industry observers expected AT&T's iPhone sales to take a major hit in the quarter -- with subscribers postponing their purchasing decisions in anticipation of the arrival of the iPhone 5. However, Piper Jaffray believes that the release of Apple's next-generation handset will come in time to ensure that the third-quarter results at AT&T and other carriers won't be affected.

"The iPhone 5 will likely have been released before Apple [and its carrier partners report] September results," Munster and Clinton wrote in a Tuesday investor note. "Our July survey found 94 percent of iPhone owners plan on buying another iPhone, suggesting the uptake of iPhone 5 will meet or exceed the high expectations."

Widely expected to include super-fast 4G LTE capabilities, the iPhone 5 should help drive the growth of AT&T's LTE networks rollouts. "Our 4G LTE build continues on track, and we now have LTE in 47 markets," Stephens said.

Expecting an Uptick

Credit Suisse Securities analyst Jonathan Chaplin noted that AT&T's smartphone sales this year are trending well below where they stood during the same period in 2011. But Stephens believes that AT&T's recently announced group plans for mobile devices will help boost the carrier's smartphone sales results going forward. (continued...)

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