AT&T Earnings Soar on Wireless Gains

Wireless once again has proven to be AT&T Inc.’s cash cow and the carrier will rely on its new spectrum holdings to power that trend.

On Tuesday, AT&T reported its first quarter earnings, highlighting continued strength in wireless and gains in wireline, even with residential landline losses.

AT&T racked up $3.5 billion in profit. That’s compared to net income of $2.8 billion a year earlier and $3.14 billion in the fourth quarter of 2007. The wireless unit contributed the most to the bottom line – it recorded $11.8 billion in sales and added 1.3 million net users for a total of 71.4 million, more than any other carrier in the United States.

Wireless fared well thanks to AT&T’s exclusive contract with Apple Inc. for the iPhone and because of ever-increasing demand for mobile data services such as Internet and e-mail. Wireless data sales shot up more than 57 percent compared to the first quarter of 2007.

But AT&T isn’t taking its advances for granted. The Texas-based conglomerate next will upgrade its network, using its spectrum holdings, to better compete with cablecos – they keep luring voice, video and data subscribers away from the telcos.

First, in 2008, AT&T will integrate its 850MHz spectrum with its 3G network. AT&T was using the 850MHz band for TDMA; it cut off 330,000 customers from the outdated service earlier this year.

Then, in 2009 and 2010, AT&T plans to boost speeds up to 28mpbs with HSPA Release 7. The outlook beyond 2010 calls for the carrier to use the Long-Term Evolution, or LTE, protocol. That will accommodate speeds up to 100mpbs, Rick Lindner, senior executive vice president and CFO of AT&T, told analysts on a conference call. CEO Randall Stephenson was conspicuously absent from that meeting.

All of the upgrades will make use of AT&T’s expanded spectrum coverage, from its Aloha Partners LP buyout to its winning bid for the B Block in the FCC’s recent spectrum auction. The licenses reside in the 700MHz band and provide “a terrific foundation for future wireless growth,” Lindner said.