Ma Bell's Affair With Steve Jobs Pays Off

As if it didn't do enough already, the iPhone now appears to be a cosmetic, too. AT&T (NYSE: T  ) got a helpful touch-up from Apple's (Nasdaq: AAPL  ) hot-selling smartphone during the first quarter.

AT&T said that it added 1.2 million net wireless subscribers during its first quarter, while activating 1.6 million iPhones. Talk about interesting math. Even if wireless services revenue rose 9.6% year over year to $11.7 billion, it sounds like Ma Bell lost subscribers who favor handsets from Nokia (NYSE: NOK  ) , Palm (Nasdaq: PALM  ) , and Research In Motion (Nasdaq: RIMM  ) .

As it turns out, that's not the case. A spokesperson I talked with earlier pointed out that 40% of customers who activated an iPhone during the quarter -- or 640,000 -- were new converts from other carriers. Others were upgrading from an older iPhone. So while it's likely that most of Ma Bell's new customers are iPhone users, you'll still find plenty of other handsets on its network.

Should that ever change, I'm not entirely sure AT&T would mind. Once users switch, they're likely to remain loyal; iPhone users suffer significantly lower churn rates than peers, the company said in a statement.

Some of Ma Bell's wireline business is also improving, if not as quickly or as impressively as the wireless business. For example, AT&T's U-verse Internet-based TV service added 284,000 subscribers in Q1, and with greater broadband penetration, overall wireline revenue per household rose 2%.

Analysts were surprised by the gains. "You had broadband net [additions] very strong, U-verse net adds very strong and wireless was very strong," Commresearch analyst Gregory Lundberg told Reuters. "For this economy, it was an outstanding performance."

Nevertheless, double-digit declines in AT&T's voice and directory units once again dragged down the rest of the business. Overall revenue declined 0.6% from last year's first quarter. Per-share earnings, meanwhile, fell 7% to $0.53, thanks in part to higher pension obligations.

In other words, despite hanging with a younger, hipper, more profitable crowd, Ma Bell is still showing her age. At least she's aging with style.

Brrrrrrring! It's related Foolishness calling:

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Fool contributor Tim Beyers had stock and options positions in Apple, and a stock position in Nokia, at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy needs to put you on hold. Be right back.


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