) recently announced its Q2 results in which it mentioned that it
had a great quarter in terms of smartphone sales, which is helping
drive the data revenue growth for the company. Data revenues for Q2
were up 23% year-over-year while overall revenue grew by only 2.2%.
Healthy smartphone sales are important for AT&T, which helps it
compete against Verizon (
) and Sprint (
) in the telecom market.
Our $38.75 price estimate for AT&T stock
is about 25% above market price.
Smartphone penetration is rapidly growing
AT&T sold 5.6 million smartphones including upgrades and new
subscribers in Q2, which was the second best quarter ever for the
company. The smartphone penetration (or the number of smartphone
subscribers) out of the total postpaid subscriber base now stands
at 50%, which is an increase from 36% a year ago.
The average data revenues per subscriber (ARPU) for smartphones
was 1.8x compared to other devices, which means that this parameter
benefits immensely from increasing smartphone penetration.
Lower smartphone pricing point also helped
AT&T mentioned that the lower smartphone price points that
it started to offer also drove smartphone growth. In particular it
saw solid demand for its iPhone 3GS priced at $49. This is a smart
move that capitalizes off the popularity of iPhones and gives many
subscribers a way to enjoy the popular smartphone cheaply while
driving additional data revenue for AT&T. The company also
notes that newer models like the HTC Inspire and Motorla Atrix are
The management stated in the call:
So what we did this quarter, which worked extremely well, was
to offer customers lower our price options to get into a
smartphone, not just from the point of view of the price plans
but also the device pricing. The iPhone 3GS at $49 is
selling very well. We also have the HTC Inspire and the Motorola
Atrix, two brand-new Android devices that are selling very, very
well. So what you see, are people that are stepping up from
quick-messaging devices and feature phones and stepping up to the
higher data plans, and that's what's driving ARPU.
See our complete analysis for AT&T stock