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)

Revenue for the quarter was $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, a trend Lindner said would continue to ramp up.

The margins for the wireless business, however, were squeezed in the second quarter as AT&T offered more discounts on higher-end phones in the fight to acquire customers willing to spend more on monthly plans and for premium services.

The price war in the wireless business will likely get bloodier, said Zachary Research Investment analyst Patrick Comack, but he said AT&T had a very good quarter.

"The only disappointment was the wireless margins," he said.

The company, which has struggled to turn around losses in its large business sales, saw marked improvement during the second quarter because of demand for data services.

Lindner said the company is on the verge of turning that segment into positive sales growth.

The company also reported 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.

It expects to be doing 10,000 installations a week by the end of the year.

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 hit $3 billion by year's end and $5 billion by the end of 2008.