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AT&T sees slowdown in new wireless subscriptions

As AT&T girds for the day when the iPhone is no longer exclusive to its network, it ekes out healthy revenue and profit for its fourth quarter.

Wireless subscriber growth has slowed for AT&T as the company prepares to do battle with rival Verizon Wireless.

AT&T added 400,000 new contract customers in the fourth quarter of 2010. In the year-ago quarter, by comparison, the company added 910,000 so-called postpaid subscribers. And in the third quarter of 2010, it added 910,000 contract customers.

Meanwhile, Verizon Wireless, which reported earnings earlier this week, said it added about 872,000 contract customers in the fourth quarter of 2010. Verizon also saw its sales of new contract customers slow.

In addition, AT&T reported that it added 442,000 iPad and Android tablet customers, who are primarily prepaid.

Postpaid or contract customers are more valuable because they tend to spend more than prepaid customers and to be more loyal to the service.

For the fourth quarter, AT&T reported earnings of $1.1 billion, or 18 cents a share. This includes a 26 cents a share charge for pension accounting. On a non-GAAP basis, earnings were 55 cents a share, a penny better than what analysts had expected. Revenue for the fourth quarter was $31.4 billion, up 2.1 percent from a year ago.

For the year, AT&T reported earnings of $19.9 billion, or $3.35 a share, on revenue of $124.3 billion. This compares to earnings of $12.1 billion, or $2.05 a share in 2009.

Next month, AT&T will lose its exclusive hold on the Apple iPhone, when Verizon Wireless begins selling its version of the popular smartphone. There has been a lot of speculation about AT&T losing customers to Verizon, which many critics say has a more reliable network.

But AT&T claims that its lineup of new smartphones and tablets puts it in a strong position to compete against Verizon. AT&T reported that it was still able to activate 4.1 million iPhones during the fourth quarter, even as it was being widely reported that Verizon would announce its version of the iPhone in January. The company activated 5.2 million iPhones in the third quarter of 2010.

AT&T's CEO Randall Stephenson said during the company's quarterly conference call today that the introduction of the iPhone on Verizon Wireless's network next month will make it difficult for AT&T to predict sales in the first part of 2011. But he said he thinks the company will finish the year strong in terms of sales of smartphones.

"The iPhone going onto a second network will create some volatility in the first part of year as Verizon launches the iPhone," he said. "But I feel fairly confident that we can grow through the disruption."

Stephenson pointed to the fact that the company had its second best quarter thus far selling "integrated devices."

"Just look at the fourth quarter. It was no secret that the iPhone was going to Verizon," he said. "And in spite of that, iPhone sales were still strong. We sold 4 million iPhones. So that gives us some confidence in terms of customers' loyalty to the network."

Stephenson said the mix of product sales will likely be different now that the iPhone will be offered on at least one other carrier. In particular, he said the company will be making its first big push into offering new Android smartphones this year. And the company will be selling more tablets. AT&T sold about 442,000 tablets in the fourth quarter of 2011. And Stephenson said this was just the beginning.

"(The tablet market is) being dominated by Apple products today," he said. "But new stuff is just now coming online. So I see a lot of opportunity in tablets."

Update 8:36 a.m. PT:This story has been updated with information from the company's conference call.