What Apple's Spectacular Earnings Mean For Phone Carriers

It's All About the Data

AT&T noted on its earnings call today that more users are opting for tiered data plans and are 70% are choosing the highest data plan that the company offers. AT&T Mobility CEO Ralph de la Vega said that data plans will be a $24 billion revenue stream for the company this year, a 20% rise year-over-year with no clear end in sight. 

'We now have over 41 million smartphones on our network,' de la Vega said. 'That is up over 10 million smartphones in just one year and ARPU [average revenue per user) for smartphones is 90% higher than our none smartphone subscribers.'

About 25 million (61%) of AT&T's postpaid (on contracts) smartphone base are on tiered data plans. iPhone churn, or users lost that had an Apple smartphone, was at its lowest level in five quarters, according to de la Vega. Data revenues for AT&T smartphones were at $6.1 billion. 

'Data drives this business and I firmly believe that we are in the first stages of mobile data growth, driven by the mobile Internet,' de la Vega said. 

Apple Believes It Works Fits the Carriers Needs Well

The carriers offer smartphones on a subsidies to consumers so that smartphones prices within reasonable limits. The subsidy from each equipment manufacturer to the carriers is different but Apple has been known to charge more per device, then letting the carriers recoup that lost revenue on data plans over an 18-24 month period. It is no secret that carriers around the world would love to decrease their reliance on subsidies but the flip side is that all of those iPhone sales drive revenue directly into carriers' coffers. 

'At the end of the day I think the carriers, the vast majority of carriers or maybe even all carriers want to provide what their customers want to buy and that is what they are motivated for,' Apple CEO Tim Cook said. 'From a carrier perspective, it is very important to remember that the subsidy is not large, relative to the sum of the monthly payments across a 24-month contract period.'

While the subsidy hurts the carriers in the short term, Cook believes that the iPhone directly benefits the carriers' bottom lines by providing better data efficiency. 

'The iPhone has some distinct advantages over competing smartphones,' Cook said. 'Many of the carrier executives have told me that the charge from iPhone customers is the lowest of any phone they sell of all the phones they carry. That has a significant financial benefit to the carrier. Also, our engineering teams work very hard to be efficient with data ' What I have found is that the iPhone has much better data efficiency than other smartphones that have an app-rich ecosystem.'

If we take Cook at his word and the iPhone is really more data efficient than other smartphones, then it makes sense that carriers like AT&T are seeing better ARPU on smartphone users year over year. The average monthly revenue per wireless subscriber to AT&T was $64.46 in the Q1, up 1.7%. The more tiered data plans that AT&T can sell to iPhone customers, the better its ARPU will be for smartphone owners. 

It is a symbiotic relationship. The better Apple does, the better the carriers do. Every company is making billions of dollars from the ecosystem and outside of a new device once every year, there is no reason to change.