Apple’s AT&T iPhone business makes everyone look good

Chicago (IL) – Depending on how you like to see your glass, AT&T’s iPhone activations grew 100% in the first quarter of 2009 compared to last year or, given the choice between any other AT&T phone and an iPhone, most AT&T subscribers switched over to the iPhone. Seems like the iPhone is making AT&T look wise, and keeping Apple from having to deal with any other riff raff, but could Apple monopolize the mobile phone business if it were to open up its platform to all carriers?

After all, one of the joys of walking into an AT&T store is the ability to walk out again when the sales staff tick you off. Compaq (remember them?) managed to build its PC business on the back of a lot of businesses that wanted to walk out on IBM salesmen. Maybe Apple needs to stir things up a bit.

For those of you panicked by the end world scenarios, AT&T may have offered glimmers of hope with its earnings report today. The company made more than $3.1 billion in the first quarter of 2009, a drop of 9.7% from the same period last year, but its shares rose because it improved overall profit margins.

About three quarters of AT&T’s new customers chose the iPhone, for which AT&T is the exclusive U.S. carrier. While the iPhone is an expensive bauble in the corporate pie for AT&T, which is forced to subsidize the sale of each unit by a significant amount, it gets the benefit of the significant increase in subscriber fees that iPhone users bring, 60% more than other customers. That should make Apple fanatics proud: You are in a recession, the Great Depression 2.0, you own a really expensive phone, and you pay more than 60% than other people per month for the privilege. Aren’t you precious?

AT&T is thanking its lucky stars for the iPhone, because it is not looking forward to where the smart money is going, on pre-paid, or no-contract services. But, what about Apple? They are going to have a very big kick in their quarterly report as a result of this announcement. With over 1.6 million iPhones activated in the first quarter of 2009, compared to 800,000 in the same quarter last year, Apple is loving the AT&T welfare checks.

However, while it may be easier for Apple to maintain its aura of exclusivity and manage its business by dealing with just one carrier in the US, the company has to keep an eye on some other statistics that beg attention: How many of AT&T’s existing customers are switching to the iPhone as opposed to new customers? It seems as if most of them do so. And I guess that means that a similar situation would occur at Verizon and T-Mobile.

Not to mention the iPhone App industry, and the possibility of a slew of services and new subscription businesses on the back of strong App sales. AT&T’s license is up for renewal in 2010. Assuming the world has not come to an end, and we’re not all riding boxcars, and eating in soup kitchens, Apple is going to have to open up the field and let other carriers jump in. Then, maybe, we’ll see what AT&T is really made of as a company.

Of course, it is likely that while many of us will be standing at bread lines, Apple users will be listening to Coldplay and will be blogging about their love of, well, themselves, making them the smarter, more successful ones. Scary thought, but true.