(Adds phone subscriber numbers)
NEW YORK, July 25 (Reuters) - AT&T Inc's quarterly profit topped Wall Street estimates on Tuesday as the No. 2 U.S. wireless carrier introduced new promotions bundling video with phone service that helped to attract new customers.
Its shares rose 2.5 percent to $37.12 in after-hours trading.
AT&T is locked in battle with industry leader Verizon Communications Inc and smaller rivals Sprint Corp and T-Mobile US Inc for customers in a market where most people already have cell phones.
Verizon in February reintroduced an unlimited data plan for the first time in more than five years, and other carriers have since then sweetened their own offers.
AT&T, which is in the process of buying Time Warner Inc for $85.4 billion in an effort to turn itself into a media powerhouse, has sought to compete by bundling mobile service with entertainment.
In June, it announced that it was offering its unlimited wireless plan with its internet streaming service DirecTV Now for an additional $10 a month.
Such product bundles helped win new subscribers as well as keep hold of old ones, Chief Financial Officer John Stephens said on a post-earnings conference call with analysts.
"Perhaps the biggest impact is on wireless churn," he said, referring to the rate of customer defections. Churn among phone subscribers who pay a monthly bill was 0.79 percent in the quarter, the lowest in the company's history.
AT&T lost 89,000 U.S. phone subscribers who pay a monthly bill in the quarter. Analysts had expected a loss of 256,000, according to research firm FactSet.
Net income attributable to AT&T rose to $3.9 billion, or 63 cents per share, in the second quarter ended June 30, from $3.4 billion, or 55 cents per share, a year earlier.
Excluding some items, earnings per share were 79 cents, ahead of analysts' average estimate of 73 cents per share, according to Thomson Reuters I/B/E/S.
Revenue declined slightly to $39.8 billion from $40.5 billion in the year-ago period, hitting analysts' average estimate. (Reporting by Anjali Athavaley; Editing by Bill Rigby)