AT&T matches Verizon smartphone for smartphone; activates 8.6M iPhones

It doesn’t matter how long AT&T(s t) has had the iPhone; it just keeps selling more. Ma Bell had another record-setting quarter thanks to Apple(s aapl), activating 8.6 million iPhones and selling a total of 10.2 million smartphones overall in the last three months of 2012.
Of those 8.6 million iPhones, only 16 percent of their owners are new to AT&T, meaning the device is really more a tool for it to keep current customers by upgrading them from other phones or earlier iPhone models. But keeping customers happy with iPhones has benefits as well. AT&T’s contract churn rate (the percentage of its customers that depart every quarter) fell to 1.19 percent from 1.21 percent in last year’s fourth quarter. That puts it just a little bit behind Verizon Wireless(s vz)(s vod), which has the most enviable churn rate in the industry at 0.95 percent.
AT&T added a net total of 780,000 new contract subscribers while increasing its overall number of connections by 1.1 million. Verizon added 2.2 million new subscribers, meaning Verizon grew at a much faster rate. But AT&T and Verizon were much more evenly matched in smartphone performance with Verizon activating 9.8 million devices. The difference was primarily in the mix of devices. With only 6.2 million iPhone sales, Verizon leaned much more heavily toward Android(s goog) devices.
AT&T’s iPhone prowess over the years largely explains its huge smartphone penetration. Seven in 10 contract customers now has a smartphone on the AT&T network.
On the wireline side, AT&T added 192,000 U-Verse TV customers and 609,000 U-Verse broadband customers, giving it 8 million U-Verse customers in total. In Q4, the number of U-Verse broadband customers surpassed the number of DSL customers, a measure of DSL’s decline as well as U-Verse’s popularity.
Like Verizon, AT&T’s bottom line suffered due to higher pension costs and the expense of recovering from Hurricane Sandy. It posted a Q4 loss of $3.9 billion off of $32.6 billion in revenues. AT&T’s LTE network now covers 170 million people, but in 2013 its capital outlays will increase as it fills out its 4G footprint to cover 250 million people and engages in the massive undertaking of transforming its old-school telephone systems into an all-IP network.
This post was updated at 2:18 p.m. to add more details on AT&T’s financial and operational performance.