AT&T posts 61 percent earnings increase

SAN ANTONIO - AT&T Inc. posted a 61 percent increase in second-quarter earnings on Tuesday, lifted primarily by its buyout of BellSouth Corp. but also aided by gains in wireless subscribers and revenue.

AT&T, the nation's largest provider of broadband Internet and land and wireless phone services, said net income rose to $2.9 billion, or 47 cents per share, from $1.81 billion, or 46 cents per share in the prior year's quarter. Wireless subscribers rose by 1.5 million to 63.7 million, AT&T said.

A fraction of that growth during the quarter was driven by the introduction of Apple Inc.'s iPhone, for which AT&T is the exclusive carrier. The device, which combines phone, media player and Web-surfing capabilities, went on sale less than two days before the end of the quarter, but in that time, 146,000 iPhones were activated, AT&T said.

More than 40 percent of the devices went to new AT&T subscribers, and sales continue to be strong in July, the company said.

Chairman and Chief Executive Officer Randall Stephenson, who took the helm in early June, has emphasized the mobile business as a key driver for the company. At his first board meeting as CEO, the company agreed to buy rural wireless provider Dobson Communications Corp. for $2.8 billion in cash.

Dobson, which does business as Cellular One in 17 states, has about 1.7 million subscribers.

For the second quarter, AT&T had earnings of 70 cents a share excluding costs for major acquisitions, up from 58 cents per share for the same three months last year and above the 67 cents average estimate of analysts polled by Thomson Financial.

Revenue for the quarter reached $29.5 billion, up from $15.8 billion in the year-earlier quarter.

Revenue growth continues to be driven by wireless data use for services like messaging, downloads and laptop connectivity. Revenue from that business was up 67 percent for the quarter to $1.7 billion.

The company also reported strong growth in the subscriber base for its U-verse television service, a premium service that uses a high-speed Internet connection for delivery. By the end of June, U-verse had 51,000 subscribers in the 23 cities in which it is available, up from the 13,000 users at the end of the first quarter.

AT&T is banking on U-verse to help combat competition from cable companies, which have been bundling high-speed Internet and land line phone service to lure customers away from tradition phone companies.

The company, which has grown aggressively through a string of acquisitions over the last several years, said cost savings from the integration of BellSouth reached $1.9 billion in the first six months of the year. The savings should reach $3 billion by year's end and $5 billion in 2008.

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