October 21, 2010, 1:03 PM — No doubt, AT&T is benefiting from the mobile revolution and its relationship with Apple. But while the mobile revolution will continue, AT&T's relationship with Apple is changing, and that will affect the carrier's bottom line in coming quarters.
For now, though, everything is upbeat. AT&T Inc. (NYSE:T) on Thursday reported third-quarter net income of $12.3 billion on revenue of $31.6 billion, a gain of 2.8 percent over last year's Q3 sales. Revenue and profit were in line with consensus estimates.
Mobile data revenue was the biggest Q3 revenue-driver, gaining 30.5 percent over the year-ago quarter to hit $4.8 billion. (That figure includes texting plans, mobile Web access and mobile apps.)
The telecom giant also reported a net gain of 2.6 million mobile customers, its largest increase ever in a third quarter. AT&T now has 92.8 million mobile customers, putting it on a par with Verizon Wireless, which this month is claiming more than 92 million mobile subscribers.
By early next year, however, AT&T may be hard-pressed to keep up. That's when Verizon Wireless begins offering Apple's iPhone to its subscribers, thanks to an inevitable agreement reached earlier this month. Up until now AT&T has been the exclusive carrier distributor of the iPhone.
So AT&T loses its exclusivity agreement with Apple. Now it has to fight with another carrier for new iPhone customers. Worse, AT&T faces the very real prospect of losing current iPhone subscribers to Verizon. A recent study released by Deloitte before the Verizon deal was reached suggests that nearly half of all iPhone users would switch to Verizon Wireless from AT&T if they had the opportunity. Starting as early as next January, they'll have that opportunity.
Given that AT&T activated 5.2 million iPhones in Q3 -- a quarterly record, and 62 percent more than Q2's total -- this is a potentially costly sword hanging over the company's head. Which could explain Wall Street's yawning reaction to AT&T's Q3 numbers: Shares were up 6 cents, or 0.2 percent, to 27.03 in Thursday's early-afternoon trading.
I'd look for the Verizon-iPhone deal to impact AT&T starting this quarter, as existing customers eager to switch to Verizon Wireless let their contracts expire and potentially new AT&T customers sit on the sidelines until they have a choice of iPhone carriers. In other words, don't look for another quarterly iPhone activation record from AT&T.