AT&T reduces loss from record sales of smartphones

AT&T Inc, the largest US phone company, reported a smaller fourth-quarter loss after customers bought a record number of discounted smartphones, including 8.6 million of Apple Inc iPhones.

The loss was down to $3.86 billion, or 68 cents a share, from $6.68 billion, or $1.12, a year earlier, according to Dallas-based AT&T. Excluding charges such as pension costs, profit was 44 cents a share, and sales did not change much at $32.6 billion, beating the estimate of $32.2 billion.

The company signed up 780,000 contract customers, offering smartphone prices that squeezed profits. Chief executive officer Randall Stephenson is working on catching up with the subscriber growth of Verizon Wireless, which added 2.1 million contract customers last quarter.

AT&T forecast sales this year of around $130 billion, as against the $128 billion. According to the company earnings per share would expand by a percentage in the ''upper single digits or higher.'' Analysts estimate an increase at 9 per cent.

Like Verizon, AT&T sells smartphones such as Apple's iPhone 5, which debuted in September, at a loss in a bid to persuade customers to sign two-year subscriptions. A new AT&T user could buy the iPhone 5 for $649 without contract or for $199 by committing to a long-term deal, for example. Even though the discounts initially affect profit margins initially, they produce a steady stream of revenue over the life of the agreement.

AT&T had already announced last week in a filing that smartphone sales hit 10.2 million in the quarter, warning that hitting that record would hurt profits.