AT&T: Utterly Dependent Upon the iPhone

Today, AT&T released their Q1 2011 earnings report. By all accounts, it was a great quarter. Wireless revenue jumped by 10.2% and the carrier saw record net adds. AT&T's consolidated revenue was $31.2 billion, a 2.3% boost from last year. Things are looking rosy for Ma Bell, which is surprising considering all the doom-and-gloom the Verizon iPhone provoked from pundits.

While Big Red's sales of the Apple smartphone haven't jeopardized AT&T, this earnings report highlights just how critical the iPhone is for AT&T's bottom line. The company bragged some 5.5 million smartphone sales this quarter. Which sounds great...until you realize that 3.6 million of those sales were iPhones.

AT&T grew by 2 million subscribers in Q1. They don't straight up say how many of those were iPhones. But some quick calculations (we know that 23% of those 3.6 million activations are new subscribers) show that more than 800,000 of those new AT&T customers joined the carrier to get an iPhone. We can probably chalk most of that 23.9% growth in wireless data revenue up to the iPhone as well.

It's hard to tell if this is really worrisome news or not. The Verizon iPhone doesn't seem to be leaching customers away from AT&T...yet. But that may change with the iPhone 5, or as long-time AT&T subscribers come to the end of their contracts. Roughly one in four AT&T iPhone users show interest in switching to Verizon. If that interest actually manifests into action, Ma Bell could be in trouble.

Whether or not Big Red's iPhone has a vampiric effect, AT&T still needs to find some way to diversify their smartphone business. Eggs in One Basket Syndrome seldom ends well.

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