AT&T 2Q Net Profit Jumps 61 Percent

The sign on the top of the AT & T building in downtown Cleveland, Ohio shines through fireworks being set off over Jacobs Field following the Indians game against the Tampa Bay Devil Rays on Monday, July 2, 2007. AT&T Inc. posted a 61 percent increase in second-quarter earnings on Tuesday, July 24, 2007, lifted primarily by its buyout of BellSouth Corp. but also aided by gains in wireless subscribers and revenue. (AP Photo/Amy Sancetta) (Amy Sancetta - AP)

SAN ANTONIO -- AT&T Inc.'s earnings jumped 61 percent in the second-quarter, driven mostly by its acquisition of BellSouth Corp. but also boosted by new wireless subscribers and better sales to large business customers.

The nation's largest provider of broadband Internet and land and wireless phone services said Tuesday that 146,000 subscribers activated new iPhones in the first 30 hours of sales as the quarter closed _ news that seemed to disappoint Apple Inc. investors a day ahead of that company's earnings release. The hotly anticipated device that combines phone, media player and Web-surfing capabilities can only be used on AT&T's network as part of exclusive deal between the companies.

For the quarter that ended June 30, AT&T 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 tiny amount of that growth was driven by the iPhone introduction, with more than 40 percent of the early iPhone activations done by new AT&T subscribers. Sales continue to be strong in July, the company said.

"We're elated with the iPhone launch," said Chief Financial Officer Rick Lindner in an interview Tuesday.

IPhone buyers sign two-year contracts and have higher-than-average rate plans and will likely continue to boost demand for wireless data services, an area of business that saw strong growth during the second quarter, he said.

AT&T shares closed down Tuesday 35 cents to $39.68 on a day of up and down trading. Apple shares dropped $8.81, or 6 percent, to $134.89.

Lindner noted that AT&T's numbers represented activation rates, which are different from the number of units sold.

Analysts, too, said any reaction of first-day sales of the iPhone were probably unfair.

"The activations might have been a little light, but I'm not necessarily sure you can read a lot into that," said Christopher King, an analyst for Stifel Nicolaus & Co.

The quarter overall was in line with expectations, he said.

Excluding acquisition costs, AT&T had earnings of 70 cents, 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.