iPhone boosts AT&T subscribers, shaving margins

Reporting its second-quarter financial results today, AT&T revealed that the iPhone continues to be both a long-term boost and a modest short-term drag on the company. The exclusive U.S. iPhone carrier said it handled more than 2.4 million iPhone activations in the quarter, partly due to the iPhone 3GS launch, and increased its overall 3G smartphone subscriber based by more than 3.5 million. The large number of iPhone purchases also came with a cost in the form of subsidies, however, narrowing wireless operating margins to 23.8% during the period, down from 25.5% in the year-ago quarter; however, these subsidies are more than repaid during the two-year service contracts of subscribers. Overall, the company saw quarterly revenue of $30.7 billion, net income of $3.2 billion, and diluted earnings of $0.54 per share.

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