Lack Of New Model Drags On iPhone Sales At Verizon

There were high expectations from the Verizon iPhone, awaited with great eagerness. Though it did lead to strong first quarter results for Verizon, the phone’s release on Verizon hasn’t affected AT&T as much as it was expected to. AT&T sold 3.6 million iPhones, up by a million, with iPhone churn unchanged, while Verizon sold 2.2 million iPhones. Let’s take a closer look.

First quarter revenue for AT&T (NYSE:T) was $31.2 billion, up 2.3% y-o-y. Wireless revenue was up 10.2% to $15.3 billion. Net income was $3.4 billion or $0.57 per share compared with $2.5 billion or $0.41 per share last year. During the quarter, AT&T added 2 million subscribers and its total wireless subscriber base reached 97.5 million. Postpaid churn was 1.18% compared to 1.15% in the last quarter and 1.07% last year.

AT&T sold a record 5.5 million smartphones, accounting for 65% of postpaid sales. Smartphone users accounted for 46.2% of its users. iPhone activations increased nearly 1 million year over year to 3.6 million, with 23% of subscribers new to AT&T and iPhone subscriber churn was unchanged year-over-year. The company also added 421,000 iPad- and Android-based tablets to its network.

AT&T is trading around $30.77 with market cap of about $182 billion. It hit a 52-week high of $31.94 on May 3.

Verizon (NYSE:VZ) reported first quarter revenue of $27 billion, up 0.3%. EPS was $0.51 compared with EPS of $0.16 and adjusted EPS (non-GAAP) of $0.48 in 1Q 2010. During the quarter, Verizon added 1.8 million net subscribers, including 906,000 retail postpaid customers, and wireless revenue increased 10.2% y-o-y to $16.9 billion.

At the end of the first quarter, the company had 104.0 million total connections, an increase of 6.1% year over year, including 88.4 million retail connections. Verizon continues to have the lowest churn in the industry at 1.01%.

Roughly 60% of all phones sold in the quarter were smartphones, up from 36% just one year ago. Thirty-two percent of Verizon Wireless’ retail postpaid customer phone base were smartphones, up from 28% at the end of fourth-quarter 2010. The stock is trading around $35.51 with market cap of about $99.4 billion. It hit a 52-week high of $38.95 on March 30.

While Verizon and AT&T have been increasing their subscriber base, other carriers have been struggling to gain new customers and contain subscriber losses. T-Mobile in May reported net customer losses of 99,000 in the first quarter compared to 77,000 net customer losses last year and churn was 2.4% compared to 2.2% last year. Its total subscriber base was 33.73 million. First quarter revenue was $5.16 billion, down from $5.36 billion last year. Net income was $135 million versus $362 million last year. AT&T announced in March its plans to acquire T-Mobile for $39 billion. However, Sprint filed a petition with the Federal Communications Commission (FCC) protesting the deal. It says the deal would harm American consumers by increasing prices and suppressing wireless device innovation.

Sprint (NYSE:S) reported first quarter revenue of $8.3 billion, up 3%. Net loss was $439 million or $0.15 per share, and the company ended the quarter with about $4 billion in cash.Sprint in its recent first quarter reported that it gained 1.1 million net subscribers to reach a total base of 51 million subscribers. Churn was 1.81% vs.1.86% last quarter. The company said it achieved its best quarterly year-over-year improvement in postpaid churn in five years, primarily as a result of progress in brand health, handset offerings, and overall customer perception. Approximately 9% of postpaid customers upgraded their handsets during the first quarter, reflecting strong demand for Sprint’s handset portfolio and continued strength in contract renewals. Apple is rumored to be testing a Sprint iPhone and if that happens, it is sure to lift Sprint’s spirits. Its stock price has also lifted up. The stock is trading around $5.19 with market cap of about $15.5 billion. It hit a 52-week high of $5.37 on May 10.

The main factor for the Verizon iPhone not being as successful as some had expected was that it was not selling a new model. The iPhone 4 came to AT&T in June 2010, while Verizon started selling the same model much later in February 2011. With another update expected in June 2011, interest in the iPhone 4 on Verizon fizzled out. AT&T says another major contributor for its strong iPhone sales was that customers on its network could use the phone worldwide. AT&T also made it tough for Verizon by selling the iPhone 3GS model for $49 while Verizon was selling the CDMA iPhone 4 for $199 to $299. Verizon says the upcoming iPhone 5 will be dual-mode CDMA and GSM and will be released simultaneously on both networks. Customers will also be able to use it in the same countries. However, the release of the new iPhone 5 has been delayed to September, and it will be another quarter before it makes a considerable difference to Verizon’s iPhone sales.