Cogent Communications

iPhone 3G – Blessing or Disaster?

AT&T, the American telecom provider, has released a statement claiming that the company’s profits in the fourth quarter of 2008 suffered considerably, and the provider is blaming the costs they have to pay out for the privileges of making the iPhone 3G available to their customers.

The provider are also complaining about how the exchange rates around the world are also proving to provide problems for the provider as well as the obvious impact that the recession is having on most companies around the world.

Share prices down 20 per cent

AT&T, who enjoys being the only provider in the US to bring the iPhone to the country, has announced that their earnings for 2008 were $2.4 billion. That number may seem like a lot, and it is, but when you notice that the shares in the company dropped by around 20 per cent compared to the previous fourth quarter of 2007, then the results aren’t something that AT&T should be happy about.

These results actually fall short of the prediction that analysts made for the fourth quarter earnings. Analysts had thought that share prices would rise to around 65 cents a share, however in reality the shares have dropped from 51 cents to 41 cents a share.

Still, there is good news for AT&T as their revenue has risen compared to the previous year’s quarter. The telecom provider’s revenue is up by 2.4 per cent making it $31.1 billion, a figure that is around the revenue prediction for the provider’s fourth quarter.

3G service too expensive for AT&T

However, the company are claiming that their fourth quarter profits were lowered by almost half a billion pounds simply due to the cost they have to pay out to support the services offered by the iPhone 3G which was introduced on July 11^th, 2008. Since then, AT&T have been struggling to deal with the blow that the Smartphone is placing on the telecom provider.

Still, a lot of AT&T’s growth through the previous year can largely be put down to the simple fact that they have the iPhone on their side, which has truly developed and expanded AT&T’s wireless existence in the market.

77 million customers thanks to the iPhone

With the introduction of the iPhone to the network, there have been the addition of a staggering 7 million customers bringing the total to a substantially high 77 million. AT&T definitely owe Apple a little thanks at least.

The CEO at AT&T, Randall Stephenson, commented in a recent statement that, “Despite the economic environment, we grew revenues in 2008, and I expect 2009 will be another year of overall revenue growth and solid progress for our company.”

AT&T though, despite claiming that 2009 is set to be a good year, are definitely feeling the crunch of the economic recession as they have recently cut 4 per cent of their workforce, a staggering 12,000 workers. The move came as the company attempted to cut costs to avoid the backlash of the economic downturn.