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AT&T Profit Exceeds Forecasts on Wireless, BellSouth Purchase

AT&T Communications corporate offices at 175 East Houston St. in San Antonio.
Toby Jorrin
AT&T Communications corporate offices at 175 East Houston St. in San Antonio.

Telecommunications service provider AT&T posted a higher quarterly profit as revenue rose from growth in its wireless business and its purchase late last year of BellSouth.

First-quarter profit rose to $2.8 billion, or 45 cents a share, from $1.4 billion, or 37 cents a share, in the year-ago quarter, before it bought BellSouth. Total operating revenue rose to $28.97 billion from $15.76 billion, also excluding BellSouth in the year-ago quarter.

AT&T said adjusted earnings per share, excluding merger related costs and other items, were 65 cents compared with analyst estimates for 61 cents a share according to Reuters Estimates.

It said it was raising its estimate for a full year adjusted operating income margin to a 23% to 24% range, up from a 21% to 23% target announced in January.

While the company's wireless unit -- which is scrapping the Cingular Wireless name for the AT&T brand -- added fewer subscribers than some analysts had expected, AT&T said its wireless profit margin improved from a year ago.

Richard Lindner, AT&T’s chief financial officer, told CNBC that as wireless penetration continues, customer growth will slow. “But,” the CFO said, “what we’re seeing is (wireless) data revenue-growth accelerating –- and that’s what’s driving revenue per customer, and double-digit service revenues.”

Lindner said momentum in data will “absolutely” offset the slowing rate of growth in voice.

AT&T said its wireless unit added 1.2 million in the quarter compared with average estimates for 1.5 million from six analysts contacted by Reuters.

AT&T said its wireless operating profit margin was 15.2%, up from 9% in the year ago quarter.

The company, which is developing video services in an effort to compete better with cable rivals, said it added 187,000 video customers in the first quarter, up from 111,000 net additions in the preceding quarter. It ended the quarter with 1.7 million video connections.

AT&T said it plans to complete its $10 billion share repurchase plan in the third quarter this year, subject to market conditions.

The company's shares have risen about 11% since the deal compared with the about 5% increase in the S&P 500 Index.

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