AT&T Inc. (NYSE: T) has confirmed a trend that many wireless industry watchers have tracked during the past nine months: The iPhone, plus faster network access, is good for boosting wireless data revenues.
The No. 1 U.S. cellular operator unveiled a 57 percent increase in its data revenues year-on-year as it reported its first-quarter numbers. Wireless revenue for the first quarter of 2008 was $11.8 billion, with wireless data revenue contributing $2.3 billion, or 22 percent, of that total -- compared with 16 percent in the same period last year. (See Wireless Pumps AT&T's Q1.)
Internet access, email, and messaging are among the applications that are pumping up data revenues in general. Lehman Brothers analyst Inder Singh writes in a research note issued Wednesday that the operator's users of "integrated devices" -- of which the Apple Inc. (Nasdaq: AAPL) iPhone is arguably AT&T's flagship -- deliver twice the data revenues generated by customers using other phones.
"Management stated that its iPhone ARPU was over $90," notes UBS Research analyst John Hodulik in a note issued Wednesday. Unstrung has already written about similar data results from iPhone users with T-Mobile International AG . (See iPhone Data Booms at T-Mobile.)
And now the industry is preparing itself for the next iPhone push, one that should help boost data usage further. Apple, which has just announced iPhone sales of 1.7 million units in its second quarter, is expected to unveil a 3G version of the iPhone some time in the next few months. (See Apple Sells 1.7M iPhones in Q2.)
"We continue to expect the launch of a 3G iPhone in the second quarter to help drive subscriber growth and add to ARPU strength in the second half," writes Hodulik.
After years of low interest rate profligacy, Western consumers are tightening their belts and paying down debt. It seems unlikely that US$90 ARPU from iPhone data services is either sustainable or scalable.
Operators own mobile connectivity and massage consumers to sustain ARPU. How the ARPU model fits into the mobile internet and (more importantly) wireless connectivity is the biggest challenge to operators.
AT&T should make good use of these profits because it won't last long.
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