iPhone subsidies hit AT&T profits

US carrier AT&T said Wednesday that iPhone 3G subsidies had taken a $900m chunk out of its pre-tax third quarter profits.

Given that the device is selling like hot cakes – Apple shifted 6.9 million units in the last quarter – AT&T warned that earnings dilution associated with the iPhone 3G is likely to run above previous expectations.

During the quarter, the operator sold 2.4 million iPhone 3Gs, of which approximately 40 per cent were new customers. This boosted net adds to the point where AT&T posted the largest postpaid net subscriber gain for any quarter in its history.

Retail postpaid net subscriber adds of 1.7 million were up nearly 40 per cent year on year and accounted for more than 85 per cent of AT&T’s 2 million total wireless net adds.

Also attributable to the iPhone was 50.5 per cent wireless data revenue growth, topping out at $2.7bn, with mobile internet access revenues doubling year on year.

On the fixed side, at the end of the third quarter, AT&T’s wireline broadband subscribers totalled 14.8 million, up 148,000. U-verse IPTV subscribers grew 232,000 to 781,000, while triple play connections fell from 47.5 million at the end of the quarter versus 49.6 million at the end of the third quarter of 2007.

Total net income climbed 5.5 per cent year on year to $3.2bn, while operating revenues jumped 4 per cent to $31.3bn.