AT& T Profit Climbs 30%, Helping Shares

AT&T's second-quarter financial results reported yesterday indicated that the weak economy is catching up to the nation's largest telecommunications company, but investors were largely satisfied with what they saw.

AT&T earned $3.77 billion, up 30 percent from $2.9 billion in the comparable period last year. Revenue rose 5 percent, to $30.87 billion.

The company's stock has been hammered in the last few months by the expectation that wary consumers would tighten profit. AT&T slightly missed analysts' revenue expectations, but shares gained $1.24, or 3.9 percent, to close at $33.06 yesterday.

The company ended the quarter with 58.9 million phone lines in service, down 2.6 percent from 60.4 million three months earlier. AT&T's 22-state service area includes parts of the country hit hardest by the drop in the real-estate market, including the Midwest and Florida.

"In areas where housing is more stressed, where there are more foreclosures, less new construction and less new home sales, that has an impact, obviously, on access lines and broadband net adds," AT&T chief financial officer Rick Lindner said.

Phone companies have been offsetting the loss of revenue from phone service in part by selling broadband, but that tactic is running out of steam as the market nears saturation. AT&T added just 46,000 broadband subscribers in the quarter, again lower than analyst estimates and far below results from recent years.

Lindner said that in many cases, customers who cancel broadband say they're not going to a competitor, just cutting costs.

He said areas where the company has rolled out its TV service, U-verse, are holding up better when it comes to retaining customers. AT&T added 170,000 U-verse subscribers in the quarter, for a total of 549,000.

The company added 1.3 million wireless subscribers, fewer than the 1.5 million added by its largest rival, Verizon Wireless, in the same period. AT&T remained the largest U.S. wireless company, with 72.9 million customers compared with Verizon Wireless' 68.7 million.

Sales of the second-generation iPhone are not included in the quarter ended June 30. AT&T, the exclusive carrier for the iPhone, said sales nearly doubled those of the first iPhone model in the first 12 days the device was available. The iPhone 3G went on sale July 11. AT&T said 40 percent of buyers were new to the company.