AT&T Mobility President and CEO, Ralph de la Vega, recently reported in a conference call with analysts that they have seen increased demand for the free iPhone 3GS since the introduction of the iPhone 4S.

With the iPhone 4S at the new $199 pricepoint and the iPhone 4 occupying the new $99 pricepoint, the iPhone 3GS is now offered for free with a 2 year contract, exclusively on AT&T.

We have another device that I think is going to dramatically change those people that are on smartphones and quick messaging devices, the [iPhone] 3GS, which is free with a 2-year contract. We’ve seen a tremendous, tremendous demand for that device even though it’s a generation old. And actually, we’re getting more new subscribers coming on the 3GS on the average than other devices. So we also have an inventory sold out on that device.

De La Vegas also mentioned that AT&T quarterly sales were slightly lower than analysts expected due to the early October release of the iPhone 4S in the 4th Quarter rather than the 3rd Quarter. He also commented on the upcoming holiday season, saying, “very, very optimistic on what the fourth quarter is going to look like in terms of smartphone growth.”

AT&T exclusively held the iPhone until the introduction of the iPhone 4 on Verizon, and now the 4S on Sprint, ramping up competition for the carrier. However, the iPhone 3GS’ continuing availability positively affects AT&T and boosts quarterly revenue.

{via Mac Rumors}