04:11 PM

AT&T Profits Up, Driven By iPhone

3.2 million iPhones were activated in the second quarter and AT&T reported a net wireless subscriber gain of 1.6 million.

With profits rising 26%, AT&T announced second quarter results Thursday that are a harbinger of the firm's improved financial performance for the full year. As usual, its exclusive iPhone marketing deal with Apple drove much of the earnings even after some well-publicized glitches with the iPhone 4's antenna.

AT&T's net income for the quarter rose to $4.01 billion from $3.02 billion over the previous year's quarter. Revenue was relatively flat, rising to $30.8 billion from $30.7 billion last year.

The firm said it activated 3.2 million iPhones -- an impressive number even though nearly three-quarters were upgrades from earlier iPhone models. AT&T said its U-verse TV revenues exceeded $1 billion for the quarter as consumer IP revenues now represent more than 40% of the firm's consumer wireline revenues. U-verse TV subscribers now total 2.5 million, representing a gain of nearly 60% in a year. The company said more than three-fourths of its U-verse TV subscribers have triple or quad bundles.

"We continue to see positive signs of growth in almost every customer segment of our business, especially wireless, which speaks to the quality of our execution and our leadership in the industry's most powerful growth driver -- mobile broadband," said Randall Stephenson, AT&T chairman and chief executive officer, in a statement.

The quarter's positive results prompted AT&T to update its earnings outlook for the full 2010 year from its former forecast of "stable-to-improved earnings" to "strong earnings per share growth"

The quarter wasn't perfect, though. The results were helped by job cuts, most by attrition from its gradually shrinking wireline business. AT&T now has about 272,000 employees.

The real driver, however, was wireless as AT&T posted a total net wireless subscriber gain of 1.6 million for a total of slightly over 90 million phones in service A total of 496,000 new wireless contract customers signed up in the quarter, representing a significant drop in sign-ups from previous years as consumers increasingly move to pre-paid plans. About 300,000 pre-paid plans were sold during the quarter.

A host of connected devices like eReaders, femtocells, GPS systems and alarm monitoring systems also raised the connected devices net to 6.7 million.

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