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AT&T Grows iPhone Base in Q1

AT&T (NYSE:T) is off to a fast start in 2011, with growing revenues and increasing numbers of iPhone subscribers.

Revenue for the first quarter of AT&T's fiscal 2011 was reported at $31.2 billion, up by 2.3 percent on a year-over-year basis. Net Income for the first quarter was reported at $3.4 billion, or $0.57 per share, up from the $2.5 billion, or $0.41 per share, in the first quarter of 2010.

Rick Lindner, AT&T's CFO, attributed his company's first quarter success to a number of factors including, double-digit wireless growth, continued U-verse growth of more than 65 percent year-over-year and stable trends from AT&T's business segment.

Lidner noted during AT&T's earnings call, that going into the first quarter, AT&T knew that with Verizon getting the iPhone there was the possibility of some volatility. As it turns out, the impact of the Verizon iPhone wasn't much on AT&T's business.

Ralph de la Vega, AT&T's President and CEO for Mobility and Consumer Markets noted during the earnings call that iPhone sales increased during the quarter. AT&T reported that they had more than 3.6 million iPhone activations during the quarter, which was 1 million more than the same quarter in 2010. Of those activations, 23 percent of the subscribers were new to AT&T.

"The fact is that, it was well known for months and quarters in advance that another carrier would launch the iPhone," Lidner said. "And yet, we continued to see customers upgrade their devices, enter into new contracts in the third and fourth quarters last year and in record numbers and that continued into the first quarter this year when the phone was available on another carrier."

In Lidner's view, it is the AT&T network which is keeping iPhone users coming back to AT&T.

"For heavy data users, being on our network, having a faster data experience, having simultaneous voice and data, having the ability for high-end users who do any amount of international travel to be able to use that device, not just in the U.S. but around the world, all of those things were important to the iPhone customer base," Lidner said.

Overall smartphone sales were the strongest ever, with AT&T signing up 5.5 million customers smartphone subscribers during the quarter.

AT&T's network is still in the process of being improved to further meet the demands for smartphone data scalability.

"We saw an increase in national broadband speeds over the last six months," De La Vega said. "We've had solid improvement in voice metrics thus far this year, and we improved both voice retainability and voice accessibility."

AT&T has announced its intention to acquire T-Mobile USA in a deal valued at $39 billion. Part of the rationale for the T-Mobile deal is a bid to improve the overall AT&T network.

"The only concern we have with network is the long-term capacity constraints that we face with spectrum," De La Vega said. "That's one of the things that will hopefully be relieved with the T-Mobile transaction."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.