United States carrier AT&T said this morning it activated 7.6 million iPhones during the holiday quarter, besting Verizon’s 4.2 million iPhone activations. It was the best-ever quarter for sales of Apple’s handset for AT&T as iPhone accounted for a whopping 80.8 percent of the 9.4 million smartphones the carrier sold in Q4 2011 (56 percent in Q3 2011).

From the earnings release:

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, and more than twice as many Android smartphones were sold versus the fourth quarter a year ago. iPhone sales were helped by a superior customer experience, with AT&T delivering download speeds up to three-times faster than on other U.S. carriers’ networks.

Strong iPhone 4S and Android performance helped the carrier weather the storm to some extent as the numbers also reveal a big net loss $6.7 billion, or $1.12 a share, despite a 2 percent increase in sales in 2011. Much of this is contributed to a $4 billion break-up fee for the failed merger with Deutsche Telekom’s T-Mobile USA unit and a change in its pension accounting. If we exclude the breakup fee, pension costs and the impairment of its directory asset, AT&T earned 42 cents per share. Additional data points after the break.

Revenue for the quarter was $32.5 billion, which is a 3.6 percent increase from the year-ago quarter. Operating margins for the wireless business dropped from 22.9-percent a year ago to 15.2-percent. Exceptional iPhone sales (that command one of the highest subsidies in the industry) contributed to the lower operating margins, the carrier noted. AT&T Chairman and Chief Executive Officer Randall Stephenson announced share repurchases due “in short order.” AT&T also said it added 700,000 square miles of 3G last year, noting that 80 percent of mobile broadband is now on its enhanced backhaul that supports 3G HSPA+ speeds.

Rival Verizon Wireless announced that on Tuesday it activated 4.3 million iPhones on its network, accounting for over half the 7.7 million total smartphones shipped during the quarter. Additionally, Verizon said it sold some 1.6 million 4G LTE smartphones, of which more than 18 devices were mostly Android smartphones. This means that AT&T and Verizon together activated 11.9 iPhones during the holiday quarter in the U.S. Meanwhile, Sprint did not divulge its iPhone activations. Assuming sales of at least 3 million units, U.S. carriers may have activated approximately 15 million iPhones in Q4 2011, or about 40 percent of the 37.04 million iPhones sold worldwide in Apple’s fiscal 2012 first quarter that spanned 14 weeks and ended Dec. 31, 2011.

Note, however, that activations also include used or old devices re-purchased and re-activated on new contracts, meaning equating activations with sales is not very accurate. In addition to AT&T, Verizon and Sprint, regional carriers C Spire and Claro Puerto Rico are now also carrying Apple’s device. Apple’s record-breaking iPhone performance during the crucial holiday shopping season helped the company narrow a gap between Android smartphones during the October to November 2011 period to just four percentage points, research firm Kantar Worldpanel ComTech estimated yesterday.

Smartphone volumes by vendor, includes fourth quarter of 2011 (LG and Samsung numbers are estimated). Credit: Asymco

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