AT&T Rides iPhone to Rescue

Brian.oco 0 Tallied Votes 157 Views Share

AT&T’s stock is up two percent today after announcing that second quarter revenues rose 30 percent – an uptick that many pundits are ascribing to its booming wireless business.

Me? I’d say that, more directly, the high profile partnership with Apple and the iPhone have fueled that boom in wireless sales. AT& T is the telecom carrier for the iPhone and that had to contribute to AT&T adding 1.3 million new customers to its wireless consumer base. AT&T says that 40 percent of those new customers are new iPhone buyers. Even as the stock rises, investors should notice that AT&T hasn’t even booked the revenues from its new iPhone sales from last month – the Q2 numbers came in without the iPhone figures – so the company has some serious money in the bank going into the last half of 2008. Undoubtedly, more iPhone customers will add more money to AT&T’s coffers, making the Apple/AT&T alliance one of the most productive and profitable (for both companies) in recent history.

Consequently, most Wall Street observers have to be pleasantly surprised with AT&T. It’s the first of the big telecom carriers to post Q2 earnings with Verizon and Quest on deck. AT&T’s stock is trading at around $31 (before the bump up today) which is a year-long low for the company. AT&T has been losing a slew of landline customers as more people desert their home phones for cell phones or phone service from cable and Internet companies. The company ended the quarter with 58.9 million phone lines in service, down 2.6 percent from 60.42 million three months earlier. That's a faster decline that many analysts had expected Even the rising number of foreclosures has hit the company, with people not only fleeing their homes and mortgages, but their phone service, too.

But that’s about it for the bad news, and even the bad news here is recoverable.

For the quarter ending June 30, AT&T earned $3.77 billion, or 63 cents per share, up from $2.90 billion, or 47 cents per share, in the same period a year ago. Excluding merger-related one-time charges, AT&T said it earned 76 cents a share. That matched the average estimate by analysts polled by Thomson Financial. Revenue rose 4.7 percent to $30.9 billion. Analysts expected $31.1 billion in revenue, according to Thomson.

The numbers are roughly in line for what analysts expected, but that’s not really the point. Some nay-sayers are popping up on the Web saying that the loss of landline customers would really hurt AT&T stock. People trading their home phones for cell or Internet phones is a trend that’s not going away. It’s the future and AT&T, with its Apple alliance, is well prepared for it.