AT&T said it gained 2 million wireless subscribers in the latest quarter, but most were from non-phone services such as tablets and Internet-connected cars.
The net increases in the July-September quarter included nearly 1.3 million connected devices, such as home-security systems. Cars made up more than 500,000 of that total, thanks to the inclusion of Internet connectivity in many 2015 models that went on sale in recent months. On top of those figures, Dallas-based AT&T added 342,000 tablet customers.
That doesn't mean AT&T didn't do well on phones. The company didn't provide a breakout on overall phone customer additions, but said it added 466,000 smartphone customers, including existing customers upgrading from basic phones. AT&T gets more revenue from smartphone customers, especially those who buy larger data plans.
But AT&T faces pricing pressure from smaller rivals T-Mobile and Sprint in a competitive environment in which most Americans already have a cellphone. In a bit of good news for AT&T, the company said the turnover rate, or churn, for so-called postpaid accounts was less than 1 percent, the best for a third quarter.
The rise of tablets and other devices gives wireless carriers additional revenue sources. For instance, adding a tablet to a plan means an additional $10 in monthly service fees. Although that's less than the $15 to $40 that AT&T gets for a new phone, the company doesn't have to subsidize the cost of the tablet, the way it often does when customers buy a new phone under a two-year contract.
Meanwhile, AT&T is trying to wean customers off subsidies and into installment plans in which they ultimately pay full price for a phone -- $650 for an iPhone 6, for instance, compared with $200 under subsidy pricing. AT&T officials said that means less service revenues in the short term.
For the third quarter, AT&T said it had net income of 58 cents per share. Earnings, adjusted for costs related to mergers and acquisitions and to extinguish debt, came to 63 cents per share. The results fell short of Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of 64 cents per share.
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AT&T reported revenue of $32.96 billion in the period, which also did not meet Street forecasts. Analysts expected $33.25 billion, according to Zacks.
In the year-earlier quarter, AT&T earned 72 cents per share on revenue of $32.16 billion.
Shares of the company shed 50 cents to $34 in after-hours trading.