iPhone 3G Sales Spur AT&T Wireless Growth in Q4 2008

AT&T today reported financial results from the fourth quarter of 2008 and announced that they had activated 1.9 million new iPhones during the quarter. That number was down from 2.4 million activations in the third quarter, its first full quarter of availability, but was still sufficient to play a significant role in AT&T subscriber growth, which saw an overall net gain of 2.1 million subscribers.

While iPhone activations result in an up-front hit to AT&T's earnings due to the subsidy provided to Apple, AT&T values new iPhone customers for their extended contracts at a higher average monthly rate than typical wireless subscribers. AT&T also reported that 40% of iPhone activations were to customers who were new to AT&T, a figure consistent with previous results.

Fortune analyzes how the iPhone has helped drive AT&T's wireless growth:


1. AT&T has activated 4.3 million iPhone 3Gs since its launch, 1.9 million in Q4 alone -- more than double its iPhone activations one year earlier.

2. The average revenue from Phone users is 60% higher than the typical AT&T customer -- thanks to that $30 per month data fee. Their heavy use of Web services helped drive AT&T wireless data use up 51.2% year to year, which as reader Jon in Brentwood, Calif., points out is not necessarily a good thing.

3. About 40% of the iPhone activations this quarter were new AT&T customers, either buying their first cellphone or switching from another carrier.

4. The churn rate -- the percentage of customers who drop AT&T's service -- among iPhone owners is significantly lower than the rest of the network, sharply reducing marketing costs.

Overall, AT&T's wireless revenue rose 13.2% year-over-year and made up 41.4% of AT&T's total revenue, up from 37.4% in the year-ago quarter.

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