Hidden in AT&T Inc.'s financial statements is a story that runs counter to its optimistic profit projections: The company is making less and less from each new smartphone subscriber.
Calculations by the Associated Press, based on AT&T's public statements, indicate that the average monthly bill for its smartphone subscribers has fallen from $88 to $80 in a year.
That number should be of great concern to Dallas-based AT&T, because like most big phone companies, it is struggling with a slowdown in new subscribers. Nearly all adults -- and many kids -- in the U.S. already have cellphones. AT&T's executives have been touting smartphones as the solution, since the devices require consumers to pay for data use in addition to voice calls. Smartphone subscribers, therefore, pay more. So moving customers from regular phones to smartphones will keep boosting revenue, AT&T has said.
But an analysis of AT&T's own figures indicates that smartphone bills have shrunk by 9 percent over a year, challenging the company's picture of long-term revenue growth.
The company doesn't disclose the average smartphone bill, but says it's 90 percent higher than the average non-smartphone bill. AT&T reveals the number of smartphone and non-smartphone subscribers, and the average monthly bill for a contract-based plan, which is $64.46. Together, these numbers allow for an approximate calculation of the average smartphone bill.
AT&T did not explicitly confirm the calculations, but its chief financial officer, John Stephens, said the composition of new smartphone customers is changing. The early smartphone users were business people and others willing and able to pay high monthly fees. Now, AT&T and other phone companies are going after people who can't pay as much.
AT&T, the country's largest telecommunications company, reported first-quarter results Tuesday morning, showing that it essentially gained no phone subscribers on contract-based plans during that three-month period. That has happened only once before: a year ago, when Verizon launched its version of the iPhone.
AT&T gained a net 187,000 customers on contract-based plans in the January to March period, but these were almost all tablet users, brought in by the launch of the new iPad in March.
By contrast, Verizon last week reported adding 501,000 subscribers on contract-based plans.
Over the last five quarters, Verizon has added nearly three times as many contract subscribers as AT&T. Over the previous two years, the rivals split new subscribers nearly evenly.
AT&T's net income for the January-to-March period was $3.6 billion, or 60 cents per share, up 5 percent from $3.4 billion, or 57 cents per share, a year earlier.
In particular, AT&T saved money by selling fewer iPhones than analysts expected. AT&T subsidizes each new iPhone by hundreds of dollars, hoping to make the money back over time in the form of service fees.
Revenue was $31.8 billion, up 2 percent from a year earlier. It matched analyst expectations.
AT&T shares rose $1.11, or 3.6 percent, to $31.72 on Tuesday. The shares are close to a four-year high of $31.97 hit a month ago.