AT&T reported a record number of iPhone activations— 5.2 million — blowing past Wall Street estimates. This is one of the last quarters when AT&T will have exclusive access to Apple's iPhone, so all these new subscribers locking themselves in for a 2-year contract is a positive.
Earnings were right in line with projections — 55 cents per share excluding one-time items — while revenue bested expectations, growing 2.8% over last year to $31.58 billion.
So why is AT&T trading fractionally lower?
It's partly because of the long-anticipated loss of AT&T's exclusive with the iPhone. But it's also because of wireless service margins, which fell to 37.6 percent from 40.3 percent a year ago. This drop can be attributed to the fees AT&T pays Apple to keep the price of the iPhone down. And in the fourth quarter the company will feel more pressure on these margins because of expenses to integrate its recently-acquired Alltel customers.