(Reuters) - With only days remaining until it loses its grip over U.S. iPhone sales, AT&T Inc warned of a "rocky" start to 2011.
AT&T's shares fell nearly 3 percent in response to a disappointing profit outlook for the year, further unnerving investors about its growth prospects once market leader Verizon Wireless launches an Apple Inc. iPhone next month.
Chief Executive Randall Stephenson, even while forecasting "healthy" customer growth, acknowledged that the new iPhone would make life tougher, at least initially.
"It may be rocky in the beginning of the year, kind of volatile, hard to predict, but we think as we work through it and the market stabilizes, we'll be able to grow through it," Stephenson said during the company's quarterly conference call in which he seldom takes part.
The company, heavily dependent on iPhone, forecast 2011 earnings per share growth in the mid-single-digit percentage range. Analysts expected growth of about 10 percent.
"I suspect they're coming to grips with the reality of the iPhone exclusivity wearing off," said Avian Securities analyst Gerard Hallaren. He described it as "a slow bleed" for AT&T.
Adding to negative sentiment, AT&T's net additions of 400,000 valuable contract customers in the fourth quarter compared poorly with almost 504,000, the average expectation from eight analysts contacted by Reuters.
AT&T's figure was also less than half the 872,000 new contract customers reported by Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc.
"These results coming on the heels of Verizon's, really demonstrate Verizon's leadership position in the (contract customer) segment," Mizuho analyst Michael Nelson said.
AT&T's wireless profit margin was thinner than expected, too. The margin remained at 37.6 percent, in line with the third quarter, counter to AT&T's promise for an improvement.
The prospect of a Verizon iPhone has set the tone for the telecoms industry this earnings season. Motorola Mobility, which makes phones including the Droid for Verizon, acknowledged on Wednesday that its sales would be hurt by the arrival of iPhone. Its shares dropped almost 12 percent on Thursday.
But AT&T noted that it still managed to activate 4.1 million iPhones in the quarter on top of 5 million activations in the third quarter, despite widespread speculation about the Verizon Wireless iPhone's arrival.
"With all that hype going on, we sold over 9 million iPhones," Chief Financial Officer Rick Lindner told Reuters. "We've a very solid loyal customer base with the vast majority with long-standing family or business relations."
