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AT&T sold twice as many iPhone 5 smartphones as its main competitor, according to mobility chief Ralph de la Vega.
AT&T’s closest rival, Verizon Wireless, said last week that it sold 651,000 iPhone 5 units in the third quarter. Based on de la Vega’s statement, this means AT&T rang up sales of roughly 1.3 million units. Sprint Nextel reports its results on Thursday.
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AT&T further cemented its lead as the preeminent iPhone carrier in the U.S. with 4.7 million iPhones sold in the third quarter. But the numbers underscore AT&T’s dependence on the iPhone, more so than any other carrier, for growth.
As with Verizon, AT&T’s iPhone sales were likely made up of largely of the older iPhone 4S. De la Vega noted that while preorders and demand were sky-high for the iPhone 5, the 10 days of availability and supply issues limited how many it could sell. He blamed the lack of available units for the disappointing subscriber growth, since most of its supply went to existing customers exercising their upgrades.
“We faced significant supply constraints in the third quarter, which clearly affected net (customer additions),” de la Vega said on a conference call with analysts today.
AT&T disappointingly added only 151,000 contract customers. But facing the same issues, Verizon added 1.5 million contract customers.
“AT&T, in short, is no longer a share gainer,” said Craig Moffett, an analyst at Sanford C. Bernstein.
Both Verizon and AT&T were expected to post stronger iPhone figures, suggesting Apple may post disappointing iPhone sales when it reports its quarterly results on Thursday.
Beyond wireless subscribers, AT&T has been attempting to drive growth in areas, adding cellular connections to everything from dog collars to cars and even to the home with its security service.
AT&T, however, had to answer questions on how it can pump up customer growth again after seeing such a dramatic decline in the third quarter. De la Vega said that he expects performance to improve in the fourth quarter with a larger supply of iPhones and other mobile devices such as tablets.
“I feel very comfortable where we will be in a position to add more customers as (iPhone) supply becomes available,” he said.
The launch of the latest iPhone 5 isn’t any different than prior launches, de la Vega added, noting that carriers have to deal with a large spike in orders initially, which ultimately slows down and becomes more reasonable. He said that on days when there are supplies of iPhone 5 units available, the company is able to add a net 5,000 to 10,000 customers in a single day.
AT&T’s results underscore the importance of the iPhone and smartphones to the company. De la Vega said that 64 percent of its base of customers who have contracts own smartphones, and smartphones make up 80 percent of sales.
The company sold 6.1 million smartphones in the quarter, up from 4.8 million a year ago.
While the iPhone represents customer growth, the blockbuster smartphone comes with a price in the form of hefty subsidies AT&T must pay Apple. While subsidies represent a standard industry practice, the carriers pay a much higher subsidy to Apple than to other phone manufacturers.
That hurts AT&T the most, which regularly has the highest iPhone sales quarter after quarter, and has the largest base of iPhone users thanks to its previous exclusive agreement with Apple.
The company is looking to address the subsidy issue by offering a broader array of devices. De la Vega noted that the company will have a wide variety of options for the holiday quarter, citing the Lumia 920 Windows Phone from Nokia as a potential alternative. HTC, LG, Sony, and Samsung also have a number of phones for AT&T this quarter.
“There’s a great opportunity to drive subsidies down with devices with great technology that’s cheaper to make,” he said.
Apple iPhone 5 vs. Samsung Galaxy S3 vs. HTC One X (pictures)
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