AT&T Profit Surges on Wireless Sales Growth

Top U.S. phone company AT&T posted a 41.5 percent rise in quarterly net profit Tuesday, as Apple's iPhone helped boost wireless subscriber growth above market expectations.

AT&T , the exclusive U.S. service provider for the iPhone, said its third-quarter net profit was $3.1 billion, compared to $2.2 billion in the year-earlier quarter before it bought BellSouth.

Earnings per share fell to 50 cents from 56 cents due to a larger number of outstanding shares following the acquisition.

Excluding costs from the deal and other items, profit rose to 71 cents per share from 63 cents. That was in line with the Wall Street's average forecast, according to Reuters Estimates.

AT&T's wireless subscriber growth, however, beat analysts' expectations. The company added a net 2 million wireless subscribers in the quarter, the highest third-quarter increase in the company's history.

That exceeded the average forecast of around 1.5 million from six analysts contacted by Reuters. Estimates ranged from 1.2 million to 1.8 million.

Wireless Subscribers

"It was a remarkable quarter in wireless. It was well above estimates," said Kevin Roe, an analyst at Roe Equity Research who had forecast a net addition of 1.2 million wireless users.

"The iPhone materially helped third-quarter results. It absolutely was a draw for subscribers."

Apple said Monday that it shipped 1.12 million units of the iPhone in the quarter. That was toward the high end of analysts' forecasts.

Some investors had hoped for even better sales but said they could pick up after Apple's move last week to let users install other developers' software on the device.

AT&T said third-quarter revenue nearly doubled, to $30.1 billion from $15.6 billion. But combining sales from the former BellSouth as well as their wireless joint venture, revenue rose 3.2 percent.

AT&T closed the acquisition of BellSouth late last year, and Cingular Wireless has been renamed AT&T.

AT&T said wireless revenue in the quarter totaled $10.9 billion, up 14.4 percent from the year-earlier quarter. Wireless operating income margin rose to 18 percent from 14.8 percent.

Wireless and Internet services have helped AT&T grow despite a decline in landline subscribers. AT&T said high-speed Internet subscribers rose 18.6 percent from a year earlier to 13.8 million.

AT&T repurchased 50.5 million of its shares in the third quarter for $2 billion. It also paid $2.2 billion in dividends.

AT&T shares were up 23 cents to $41.40 in early trade on the New York Stock Exchange.