UPDATE 2-AT&T quarterly profit misses Wall Street estimates
NEW YORK, July 23 (Reuters) - AT&T Inc posted a quarterly profit on Tuesday that missed Wall Street expectations as it was hit by rising costs, and its shares fell 1 percent in late trade.
AT&T's revenue was helped by growth its wireless and enterprise businesses but strong wireless growth comes at a cost because the company has to pay hefty subsidies for each new wireless customer it adds to its network.
"Both wireline and wireless revenue were a little better than I expected," said Hudson Square analyst Todd Rethemeier, but he noted that the difference was not big enough to boost the company's shares.
AT&T shares fell to $35.40 in late trade after closing at $35.81 on the New York Stock Exchange.
Revenue rose to $32.08 billion from $31.58 billion, compared with Wall Street expectations for $31.81 billion. Earnings per share of 67 cents, excluding unusual items, were a penny behind analysts' estimates, according to Thomson Reuters I/B/E/S.
The No. 2 U.S mobile service provider, said it added more than 550,000 contract customers in the quarter, slightly ahead of its target for about 500,000 and an improvement from its 320,000 net additions in the year-ago quarter.
However, this pushed down its wireless profit margin based on earnings before interest, tax, depreciation and amortization (EBITDA) was 42.4 percent in the quarter compared with 45.8 percent in the second quarter of 2012 due to higher costs.
And its growth rate was still well behind the 941,000 net additions at bigger rival Verizon Wireless , which reported its financial results on July 18.
AT&T also faced additional competitive pressure in the quarter as smaller rival T-Mobile US started selling the Apple Inc iPhone, a top seller for AT&T.
It posted total earnings of $3.82 billion, or 71 cents per share, compared with $3.97 billion, or 66 cents per share, in the year-ago quarter.
Chief Financial Officer John Stephens said on a conference call with analysts that the economy continued to be challenging but the company was still able to see some improvements in its enterprise business, which is one of the most vulnerable to economic fluctuations.
"Even with little help from the economy, business wireline showed sequential improvement," Stephens said.
He said the company was on track to meet its targets for revenue and earnings growth for the full year. AT&T had forecast 2 percent revenue growth for the year.
AT&T said it added 233,000 U-verse TV subscribers in the quarter, leaving it with more than 5 million TV customers. Including Internet customers it said it had 9.4 million total U-verse subscribers at the end of the quarter.