Holiday bargain hunters jumpstart AT&T Web sales

NEW YORK Wed Dec 9, 2009 3:29pm EST

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NEW YORK (Reuters) - AT&T Inc witnessed stronger-than-expected online sales around the kickoff of this year's holiday shopping season as mobile phone shoppers scoured the Web for bargains, Ralph de la Vega, the head of its mobile and consumer business, said on Wednesday.

De la Vega said it was too early to estimate AT&T's overall wireless demand in the current quarter but said that the day after Thanksgiving, the unofficial start of the holiday shopping season, appeared to bring out cost-conscious consumers.

"We didn't expect as many online sales as we did on Black Friday," he said in an interview with Reuters. "It highlights that people are looking for bargains anywhere they can find them."

Earlier on Wednesday, the executive, who also oversees the company's consumer business, told a UBS investor conference that AT&T expected to pass 2 million customers for its U-Verse home video service that day.

This means that it will likely more than double its U-Verse customer base this year. Asked if the pace of growth would continue, de la Vega said it would see "a little acceleration."

"We're hitting our stride there," he said in the later interview.

The executive told the conference that AT&T, which is offering video to help it compete better with cable providers, is very close to providing services that let consumers to move media content between their televisions, phones and computers.

WIRELESS NETWORK/MARGINS

He also spent time at the conference fielding analyst questions about AT&T's mobile network performance, which has come under pressure due to strong data service demand, particularly among users of Apple Inc's iPhone.

The executive promised to improve the network in New York and San Francisco "in the short term" as it has come under huge strain in those particular markets.

While AT&T has seen strong growth from its exclusive U.S. rights to sell iPhone, the device's popularity has also highlighted weaknesses in parts of its wireless data network.

But de la Vega noted that the company has been working hard to improve the number of dropped calls its users suffer and said that a recent test showed that its dropped-call rate was not far behind the market leader.

Since about 3 percent of its data users are using up about 40 percent of AT&T's wireless capacity, the company is also working on getting the data hogs to cut down their usage, de la Vega said. He declined to elaborate.

The executive also promised improvements in AT&T's profit margins, which trail behind bigger rival Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc.

De la Vega told analysts that he sees AT&T, the No. 2 U.S. mobile service, pushing its wireless margins into the 40 percent range next year from around 38 percent in the third quarter. He eventually expects it to see mobile margins in the 45 percent range.

"We've several hundred basis points more of wireless margin expansion in the next few years," de la Vega told the audience.

In afternoon trade, AT&T shares were off 14 cents at $27.47 on the New York Stock Exchange.

(Editing by Paul Thomasch and Steve Orlofsky)

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