- Associated Press - Wednesday, October 24, 2012

NEW YORK (AP) - The flow of customers into AT&T’s wireless stores slowed further in the latest quarter, putting the company far behind rival Verizon Wireless.

AT&T Inc. on Wednesday said it added a net 151,000 new customers on contract-based plans from July through September, the lowest number for that period since at least 2003.

The Dallas-based company is blaming short supplies of the iPhone 5, which launched a week before the end of the quarter. But that didn’t hold back Verizon Wireless, which last week reported adding 10 times as many contract-signing customers as AT&T did.

AT&T said the shortage of iPhones meant that most of them went to people who were already AT&T customers. Only 18 percent of the 4.7 million iPhones it activated in the quarter went to new subscribers, the lowest number yet.

AT&T suggested that it suffered in comparison to Verizon because it launched its new data-sharing plans later in the quarter. Verizon launched “Share Everything” just before the start of the quarter and said it prompted people to add lots of extra devices to their plans. AT&T waited until August to introduce “Mobile Share” and was less aggressive about it. At Verizon, “Share Everything” was the only choice available to new customers, while AT&T kept its old plans alongside the new one.

“For years, Verizon and AT&T have performed a nearly impossible feat; both companies have consistently and significantly outperformed an industry of which they already represented the overwhelming share,” said Sanford Bernstein analyst Craig Moffett. “Simple math says that can’t be sustained forever … Verizon Wireless is still outperforming industry metrics. But AT&T isn’t anymore.”

“We’re not reliant on connecting more people,” said Ralph De La Vega, the head of AT&T’s wireless division, on a conference call with analysts. The company’s strategy now is to expand services, getting existing customers to spend more, for instance by hooking up their homes to AT&T’s security and automation services, he said.

At the end of the quarter, AT&T was sending out bills for 77.3 million devices on its network, while Verizon served 95.6 million. Both have millions more devices on their networks through wholesale arrangements, but these pay much less.

AT&T’s wireline business, which makes up nearly half of revenue, continued to shrink slowly, as people cancel their landlines and move from phone-line broadband to cable modems.

AT&T’s quarterly results were largely flat with a year ago. Net income was $3.64 billion, or 63 cents per share, nearly unchanged from $3.62 billion, or 61 cents per share, a year earlier.

For the latest quarter, analysts expected earnings of 60 cents per share.

Revenue was also essentially flat from last year, at $31.46 billion. Analysts expected $31.57 billion.

Comparisons to last year were affected by the sale of AT&T’s phone book business in May. The unit was profitable but shrinking, so AT&T sold a controlling stake to a private equity firm for $950 million. When subtracting the phone book business from last year’s results, AT&T’s earnings rose about 2 percent in the latest quarter, as customers kept shifting from regular phones to smartphones with more expensive service plans. Revenue grew nearly 3 percent.

AT&T shares fell 29 cents to close at $34.71 Wednesday.

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