In a lengthy press release, AT&T (T) boasts about its status as the exclusive carrier for the new Apple iPhone 3G, talks up its cool new features, and then… drops the other shoe: Subsidizing that phone by $199 will lower margins and earnings. From the release:
The company anticipates potential dilution to earnings per share (EPS) from this initiative in the $0.10 to $0.12 range this year and next, with a 2008 adjusted consolidated operating income margin of approximately 24 per cent and a full-year 2008 wireless OIBDA margin in the 39-40 per cent range. As recurring revenue streams build without any further revenue sharing required, AT&T expects the initiative to turn accretive in 2010.
The good news: That earnings hit is pretty minor. Consensus EPS for FY 08 is $3.12. And given that AT&T is no longer sharing any of its service revenue with Apple — and will be charging more for its service — it obviously feels this is a safe bet.
AT&T will again offer iPhone calling plans beginning at $39.99 per month for 3G subscribers, but as we predicted, the carrier will charge $30 a month — $10 more than it does now — for 3G data access.