AT&T Inc. (NYSE: T), the second-largest U.S. wireless operator, said smartphone sales in the fourth quarter are likely to hit a record, driven by devices such as Apple Inc. (Nasdaq: AAPL)’s iPhone.
The company said it sold 6 million smartphones in the first two months of the period, compared with the previous quarterly record of 6.1 million in the third quarter of 2010. Since December is traditionally one of the strongest months for sales, AT&T said it expects to push past the previous mark.
“We expected this to be one of our strong smartphone sales quarters ever,” John Stephens, the company’s chief financial officer, said today at a UBS AG conference in New York. “What we didn’t know was that we would nearly break our smartphone sales record in just the first two months of the quarter.”
Apple’s latest iPhone 4S hit store shelves in October, and though it wasn’t a totally revamped version as many had expected, sales have been massive.
On Wednesday, Sterne, Agee & Leach Equity Research bumped its expectations for total sales of the iPhone to 28 million, from 26 million.
Stephens also noted AT&T’s goal of making its high-speed 4G LTE network available to 70 million cellphone-toting Americans by the end of December.
AT&T, the first operator to offer the Apple phone in the U.S., sells the latest model, the iPhone 4S, and the older iPhone 3GS, which is free with a two-year service contract. It also offers devices that run on Google Inc.’s Android operating system from Samsung Electronics Co. and Motorola Mobility Holdings Inc.
Sales of smartphones, which are typically subsidized by carriers to gain future service revenue, are expected to have a near-term negative impact on margins and earnings, Dallas-based AT&T said in a regulatory filing. Still, the upfront costs are worth the benefits in the future, Stephens said.
“The benefits of this incredible growth are clear: these subscribers are the premium customers for the industry, helping create long-term value and stability,” AT&T’s Stephens said. “It’s an investment we are more than willing to make.”
Walter Piecyk, an analyst with BTIG LLC, estimates that AT&T will sell 8.7 million smartphones in the fourth quarter, with 5.3 million of those being Apple iPhones.
Stephens declined to give details about the negotiations to complete AT&T’s proposed acquisition of T-Mobile USA, a deal the U.S. Justice Department has sued to block.
AT&T is “motivated to complete” a deal with Deutsche Telekom AG (DTE), T-Mobile’s parent company, he said.
(Bloomberg and The Associated Press contributed to this report.)
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