AT&T and Apple - A Great Combination

AT&T to Offer Next-Generation iPhone on Its High-Performance 3G Network
Broadband Speed and New Capabilities Enhance Iconic Mobile Device $199 Starting Price Significantly Expands Mass Market Appeal New Corporate E-Mail and Web Applications Move iPhone Further Into Business Market

AT&T Inc. (NYSE:T) today announced it will be the exclusive U.S. provider of the new iPhone 3G, details of which were outlined earlier today at Apple's Worldwide Developer's Conference in San Francisco.
Under the terms of a new agreement with Apple, AT&T remains the exclusive U.S. carrier of the iPhone 3G, which will be available beginning July 11 at a starting price of $199 with a two-year contract. AT&T Inc. (NYSE:T) today announced it will be the exclusive U.S. provider of the new iPhone 3G, details of which were outlined earlier today at Apple's Worldwide Developer's Conference in San Francisco.
Under the terms of a new agreement with Apple, AT&T remains the exclusive U.S. carrier of the iPhone 3G, which will be available beginning July 11 at a starting price of $199 with a two-year contract.

New Agreement With Apple Reflects Significant Growth Opportunity
The new agreement between Apple and AT&T eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple. Under the revised agreement, which is consistent with traditional equipment manufacturer-carrier arrangements, there is no revenue sharing and bothiPhone 3G models will be offered at attractive prices to broaden the market potential and accelerate subscriber volumes. The phones will be offered with a two-year contract and attractive data plans that are similar to those offered for other smartphones and PDAs. AT&T anticipates that these offers will drive increased sales volumes and revenues among high-quality, data-centric customers. Currently, less than 20 percent of AT&T's postpaid subscribers have integrated devices capable of voice, Web and data applications. Based on the company's experience, average monthly revenues per iPhone subscriber are nearly double the average of the company's overall subscriber base.

In the near term, AT&T anticipates that the new agreement will likely result in some pressure on margins and earnings, reflecting the costs of subsidized device pricing, which, in turn, is expected to drive increased subscriber volumes. The company anticipates potential dilution to earnings per share (EPS) from this initiative in the $0.10 to $0.12 range this year and next, with a 2008 adjusted consolidated operating income margin of approximately 24 percent and a full-year 2008 wireless OIBDA margin in the 39-40 percent range. As recurring revenue streams build without any further revenue sharing required, AT&T expects the initiative to turn accretive in 2010.