iPhone helps AT&T's profitability

NEW YORK, USA: AT&T Inc reported higher-than-expected quarterly earnings as strong sales of Apple Inc's iPhone bolstered profitability despite tepid overall revenue growth.

AT&T, the biggest U.S. telephone company by revenue, said on Wednesday its profit fell to $2.5 billion from $3.1 billion a year earlier, due in part to a previously disclosed $1 billion non-cash charge related to U.S. healthcare reform.

Excluding that charge, profit would have been 59 cents a share, higher than the average analyst estimate of 54 cents a share according to Thomson Reuters I/B/E/S.

"The profit number was very impressive. It was an almost 10 percent beat," said Piper Jaffray analyst Christopher Larsen.

"The iPhone was definitely a contributing factor to their improved profitability. Now that they have a large enough base of iPhone users, investors are starting to see how profitable the device is for AT&T."

AT&T, whose shares edged higher in premarket trading, said it activated 2.7 mln iPhones, with one third of those for customers new to the carrier. The company is the exclusive U.S.carrier for the popular device, though speculation has been rampant that Apple may eventually sell iPhones through Verizon Wireless.

AT&T revenue rose 0.3 percent from a year earlier to $30.6 billion, slightly softer than the average analyst forecast of $30.7 billion.

Overall, it added 1.9 million wireless subscribers in the quarter, bringing its total to 87 million. The company noted rapid adoption of smartphones, devices that can connect to the Internet.

AT&T said it added 512,000 postpaid subscribers, which are seen as the most valuable because they pay monthly bills and commit to long-term contracts. That was down from 897,000 the year before, but in line with or above most analysts' estimates.

Despite the slowdown in growth in that key segment, the increase in smartphone users helped drive wireless data revenue up 30 percent from a year earlier. Average revenue per user among postpaid subscribers rose 4 percent from a year earlier to $61.89, the company said.

Shares of AT&T rose 0.8 percent to $26.88 in premarket trading from their previous close on the New York Stock Exchange of $26.66.