Telecom giant AT&T posted earnings this morning. Revenues and profit were down slightly. Here are the wireless highlights:

• 1.2 million net gain in total wireless subscribers to reach 78.2 million; 875,000 retail postpaid net adds, up 24.1 percent versus results in the year-earlier first quarter
• 26.0 percent wireless operating income margin, 40.9 percent wireless OIBDA service margin, with sequential expansion reflecting iPhone benefits and continued operational improvements
• Continued strong integrated device adoption including more than 1.6 million iPhone 3G devices activated during the first quarter; the number of AT&T postpaid wireless subscribers with integrated devices more than doubled over the past year
• 38.6 percent increase in wireless data revenues to $3.2 billion, more than double the total for the first quarter two years earlier; growth driven by messaging, Internet access, e-mail, access to applications and related services
• Fifth consecutive quarter with a year-over-year increase in wireless postpaid subscriber ARPU, up 2.1 percent versus the year-earlier quarter to $59.21

Postpaid churn was "stable" at 1.2%

Regarding the iPhone in particular: 

AT&T’s postpaid subscriber growth reflects continued success with iPhone 3G. In the first quarter, AT&T’s iPhone 3G activations totaled more than 1.6 million, more than 40 percent of them for customers who were new to the company. AT&T’s U.S. iPhone exclusive continues to deliver subscribers with ARPUs (average monthly revenues per subscriber) that are approximately 1.6 times higher and churn rates that are significantly lower than the company’s overall postpaid subscriber base.

(emphasis added.)

What that means is that fully half of AT&T's "1.2 million net gain in total wireless subscribers" in the quarter were new iPhone subscribers. Loss of iPhone exclusivity would be a big blow therefore to AT&T's bottom line and its brand. Recognizing this, the company may be very aggressive in trying to extend the exclusivity relationship. 

However, if Apple bites it will be bad for the iPhone long term (regardless of how lucrative or favorable the AT&T offer).