Edible Apple

Despite not improving much from the same quarter a year-ago, AT&T’s earnings report for their 2009 third quarter exceeded analyst expectations.  AT&T reported earnings per share of $0.54 on revenue of $3.2 billion.

The driving force behind AT&T’s earnings this past quarter was their wireless business.  In the quarter gone by, AT&T increased its total number of wireless subscribers by 2 million, bringing the current total up to 81.6 million subscribers.  More impressively, the churn rate for its wireless customer base came in at 1.17%, setting a third-quarter record for the company.

In regards to the iPhone, AT&T divulged that it activated 3.2 million iPhones in the last quarter, and that nearly 40% of those activations were from customers who were new to AT&T.  So if you do a little bit of easy math, the iPhone by itself was responsible for 1.28 million of AT&T’s new subscribers.  In other words, of the 2 million new subscribers to AT&T during the past quarter, 64% of them switched over to AT&T for the iPhone.

There’s no denying that the iPhone has been an instrumental factor in AT&T’s efforts to attract new customers, and though AT&T has experienced a number of complaints about its inability to keep its network up to par in the face of heavy iPhone usage, the iPhone has undoubtedly been a net win for AT&T.

The iPhone, of course, is an an AT&T exclusive, but if statements from AT&T wireless CEO Ralph de la Vega are any indication, the comforting cushion of exclusivity may soon be a thing of the past.

During a question and answer session with analysts, De la Vega was asked about AT&t’s ability to succeed after the iPhone is no longer a Ma Bell exclusive.  He responded:

We have a legacy of having a great portfolio…that will continue after the iPhone is no longer exclusive to us. We think we will continue after the iPhone…to drive [results]….

Even if we lose exclusivity, we will be the only carrier with HSPA 7.2 and (new devices) will work on our network faster. I feel as strongly as ever (about the capability of devices in our lineup.

To be fair, the question was premised on the fact that the iPhone wouldn’t remain an AT&T exclusive forever, so we probably shouldn’t read too much into his answer.  But there’s certainly no denying that Apple has been less than thrilled with AT&T at times over highly publicized network problems, and their agonizingly long delay to finally support MMS messaging.  And don’t even get us started on tethering.

Now that the iPhone is 2 years old and already on its third iteration, Apple has started shifting away from its one-carrier strategy that it initially entered the smartphone game with.  At Apple’s recent earnings conference call, COO Tim Cook noted that the iPhone, in November, will become available on more than 1 carrier in both Canada and the U.K.

That said, there’s an undeniable demand for the iPhone amongst consumers who simply aren’t willing to make the switch to AT&T for a variety of reasons.  Apple’s exclusivity contract with AT&T is rumored to expire in mid-2010, and  up until recently, there’s been a lot of buzz about the iPhone eventually coming to Verizon, long considered to be the most reliable network in the U.S.  But Verizon, as of late, has made a concerted effort to promote the Android platform, and has even taken to taking potshots at Apple in 2 separate commercials.  Verizon’s actions, therefore, have tempered rumors of an impending Verizon/Apple relationship.

But no matter how you look at it, the iPhone can attract new subscribers like no other, and it’s curious that Verizon’s tendency to make strict demands on handset manufacturers is getting in the way of them making a deal with iPhone.