AT&T's Wireline Slumps — Even iPhone Can't Help

Despite its success in using the iPhone to attract new customers, AT&T saw its net income drop in the second quarter of 2009. For the quarter, AT&T generated earnings of $3.2 billion, which marked a 15.2% drop from the $3.7 billion the company reported in the second quarter of 2008.

The major reason for the drop was the continued decline of its wireline business, which reported a net income of $2 billion, or 36% less than the $3.1 billion net income the segment reported a year ago. In particular, the company's landline voice services saw operating revenues plummet to $8.5 billion in 2Q 2009, down 13.4% from the $9.8 billion it posted in 2Q 2008. The lone bright spot for the company's wireline segment was its wireline data business, which saw a 6.9% rise in total subscribers and a 5.2% rise in operating revenues from 2Q 2008.

AT&T's wireless segment performed significantly better than its wireline counterpart, as it reported earnings of $3.15 billion, up 2.7% from the $3.07 billion income it reported a year ago. The wireless segment also saw a net increase of 1.37 million new customers in the quarter, up 2.6% from the 1.33 million customers it added in 2Q 2008. Most significantly, subscribers to the company's postpaid wireless services – which typically generate more revenue per user than prepaid services – increased by 1.15 million in the quarter, up 29% from the 894,000 postpaid subscribers the company added in 2Q 2008. The company also reported activating roughly 2.4 million iPhones in the quarter.

In a prepared statement issued today, AT&T CEO Randall Stephenson said that despite its falling profits, his company had delivered solid results in the midst of a global recession.

"Our wireless momentum is excellent, operational execution and cost management continue to be strong," he said. "We continue to expand our all-IP AT&T U-verse platform to deliver broadband to more homes. We've increased our backbone capacity and continue to enhance our premier set of advanced global business solutions. These are AT&T's strengths, and these are the drivers that will lead growth as the economy turns."

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