iPhone drives AT&T net adds again

Industry watchers have been waiting anxiously to see what impact Verizon Wireless' aggressive ad campaigns highlighting AT&T Mobility's more sparse 3G coverage had on AT&T's fourth-quarter results. The answer: Not much impact.

AT&T said it it added 2.7 million net new wireless subscribers during the fourth quarter, which was the second highest quarterly gain in the company's history. iPhone subscribers continued to make up the bulk of those net adds. The company activated 3.1 million iPhone users in fourth quarter, and more than a third were new to AT&T.

Still, the issues surrounding AT&T Mobility's 3G network continues to be a focal point as executives spent much of the quarterly conference call talking about ways to improve it. AT&T said it will spend $18 billion to $19 billion on its network in 2010, more than the $17.3 billion it spent in 2009. As part of the increased capex, the operator will increase its spend on improving backhaul capacity.

AT&T Operations President and CEO John Stankey said that "wireless is our No. 1 investment priority." In particular, the company talked about two key markets that continue to experience problems: San Francisco and New York City. The company said it has added cell site controller capacity in its troubled markets. Now it is in the process of adding third and fourth radio network carriers to maximize capacity, Stankey said.

"In Manhattan specifically, now that we have scalable cell site controllers in place throughout most of the island, we're intensely focused on putting more radio capacity on the street. We'll increase the amount of 3G spectrum and radio capacity by one-third in high volume areas of the island by the end of the first quarter," Stankey said. "While we are through the majority of our zoning challenges in the Bay area, we'll continue to work the remaining issues we have in parts of the Financial District and a handful of other locations to final resolution. We're adding cell towers; and over the coming months, we're building and upgrading high-capacity antenna systems to boost performance in high-traffic areas like stadiums, convention centers, and public transportation routes."

AT&T has previously announced that its network has the software necessary to deploy HSPA 7.2 but lacks the backhaul capacity. That will happen over the course of this year and 2011.

"We anticipate that the majority of our mobile data traffic will be carried over the expanded fiber-based, HSPA 7.2-capable backhaul by the end of this year, with deployment continuing to expand in 2011," AT&T recently said a release [1].

With Apple's latest device, the iPad, coming out many have been asking whether AT&T Mobility can handle the additional traffic. However, AT&T executives said the new Apple iPad is a different model for the company because it is not subsidizing the device and because customers will activate it online--thus, AT&T won't have the typical activation and billing costs. However, executives also said they believe iPad users will rely predominantly on WiFi, and therefore it won't drain AT&T's 3G network. "We will monitor the usage as the device gets out there," said Rick Lindner, senior executive vice president and CFO at AT&T. "If it turns out substantially different, we will adapt."

Indeed, the 3G/WiFi version of the iPad will sell for $130 more than a WiFi-only device. But it all depends on which market segments the device appeals to most: casual users or power users.

For more:
- see this ZDnet article [2]
- read this FierceWireless article [3]

Related articles:
T-Mobile, AT&T make HSPA 7.2 announcements [1]
AT&T starting HSPA upgrade in six cities [4]
AT&T & LTE vs. T-Mobile & HSPA+ = Fight! [5]
AT&T activates 3.2M iPhones in Q3, hints at end to exclusivity [6]
AT&T hasn't decided yet on tiered data pricing [7] 
AT&T chief addresses network problems in NYC, San Fran [8]
AT&T CTO defends mobile broadband network [9]
AT&T reveals more femtocell details [10]