In the battle between AT&T and Verizon, AT&T has topped its rival, albeit in an undesirable area. After Verizon posted a $2 billion fourth-quarter loss earlier this week, AT&T has followed up with a whopping $6.68 billion fourth-quarter loss.

But AT&T expected the bad news after the failed T-Mobile acquisition. AT&T had to shell out $3 billion in cash-based kill fees and $1 billion worth of spectrum, as well as roaming fees, to the smaller carrier after the deal fell through. AT&T also took a hit on employee pension benefits. AT&T's monumental fourth-quarter loss compares with a $1.1 billion profit in the year ago period.

"We knew these penalties were going to hit AT&T pretty hard. It's money that they can't use to build out their infrastructure, and they are undergoing one of the largest infrastructure change-outs in the company's history," said Rob Enderle, principal analyst at Enderle Group. "This will slow them down a bit because it will cut the resources they've got to improve services. Other than that, it is a one-time charge."

CEO Cites Momentum

That said, AT&T is hardly faltering. The telecommunications giant saw fourth-quarter revenues rise 3.6 percent to $32.5 billion, beating analyst expectations. AT&T posted record sales, strong wireless network performance and improved wireline revenue trends. Enderle said AT&T's financials don't show any major competitive threat that's doing damage - -the firm is fiscally strong.

Much like Verizon, AT&T posted its best-ever smartphone sales quarter. AT&T smartphone sales were up 60 percent over the year-ago period. In fact, AT&T set a record with 9.4 million smartphones sold in the fourth quarter. That's nearly double the number sold in the third quarter and 50 percent more than the previous quarterly record.

"We had a tremendous year in terms of execution, and we have excellent momentum across our growth platforms," said Randall Stephenson, AT&T chairman and CEO. "This was a blowout quarter for sales. Our network performance is at a high level on voice quality and best-in-class mobile download speeds. Sales continue to be strong and business revenue trends are on a good track."

Looking Ahead

AT&T noted that both iPhone and Android device sales set records. During the quarter, more than 7.6 million iPhones were activated, the majority of which were iPhone 4S, which went on sale Oct. 14. More than twice as many Android smartphones were sold compared with the fourth quarter a year ago.

With smartphone growth comes data revenue growth. AT&T's wireless data revenues climbed 19.4 percent, driven by Internet access, access to applications, messaging and related services, to $956 million. The carrier reports that the number of subscribers on tiered data plans also continues to increase. About 22 million, or 56 percent, of all smartphone subscribers are on tiered data plans, and about 70 percent have chosen the higher-tier plans.

"Looking ahead, we start 2012 with the best visibility we've had in some time, and we're well positioned to deliver solid results -- including continued revenue growth with margin expansion, solid earnings per share growth and strong cash flow," Stephenson said. "In short order, we will begin share repurchases to deliver significant value to our owners."

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