AT&T, one of the largest networks to date, just had their conference call this morning.  The conference call was started off by CFO John Stevens but later on CEO Ralph De La Vega took center stage.

AT&T passed one million subscribers and experienced a 2.1 million increase in total wireless subscribers.  But sales fell by 0.3% to $31.5 billion just a notch below the $31.6 billion prediction of analysts.  The company also noted that they had the best free cash flow in two years though the higher capital spending.  Customers who cancelled their subscription also went down from 1.32% a year ago to only 1.28%.  In the quarter that just passed, they have sold 4.8 million smartphones with a total of 16 million sold since the first quarter.

The decline in sales in iPhones is directly related to the fact that people held off buying current gen iPhones, biding their time for the release of the new iPhone.

De La Vega said that there will be 15 cities in which LTE would be available in, including Boston and Washington DC.  He is also positive that the fourth quarter would be their best especially with the inclusion on sales from the iPhone 4S which, in just the first weekend, it sold over four million units already.  They are also offering the iPhone 3G for free on a two-year contract with them and they are expecting that this would broaden their reach more as the iPhone 3G is already sold out.  He also noted that AT&T subscribers are loyal to them and stuck to their plans rather than jump to rivals like Verizon and Sprint.

When asked about LTE, De La Vega stated that, “I have been a part of many network device transformations. This technology is best I’ve ever seen. The devices are great and thin and have great battery life. It’s a home run right off the bet. I think we’ve timed it perfectly. What I see happening with LTE and data is just a huge growth opportunity. Smart phones are now 52 percent of postpaid base. The smart phone is going to equal the phone. It will be 100 percent in a few years.  And then you add on top of that tablets and Mi Fis and e-readers and telematics. The growth opportunity goes off the charts. Add the cloud on top of that, great data and connectivity. Huge growth opportunities all around.”

“We’re doing it with a technology, LTE, that reduces the cost per megabyte, and is more spectrum efficient. I’m very bullish on what we’re seeing on data.  While there are several puts and takes on ARPU, it was slower smart phone growth. Third quarter was slower than normal because we didn’t have an iPhone refresh. So we expect the best smart phone quarter ever and ARPU will improve along with that.”

While Stevens answered questions about margin, “On a full year basis we’re in the 10-20 basis points lagging on an operating income basis for wireline.  Hopeful to make it up in Q4. Hope to maintain margins at this level. It’s a challenging endeavor, especially from high margin legacy products. With regard to DSL, the most encouraging piece of the DSL story, while net adds were in the 5,000 range, was that we were able to convert a huge piece of DSL to U-Verse where available. And for those who don’t have U-Verse available, there will be LTE which they say will be available to 97 percent of the country.”

And when asked about the impact of storms on margins, Steven answered, “I do believe the margins were impacted by the storms and other things. I still believe there is an opportunity to grow revenues and then have that impact on margin. The distinction we did grow revenue. The growth was not dramatic, I don’t think anyone would have expected it to be dramatic. And we’re still feeling the pressure from the legacy products.”