AT&T Inc.: Profit Drops Offset by Gains in Wireless Segment

AT&T Inc.’s wireless business again reports significant gains in the third quarter.

Photo: AT&T Inc.: Profit Drops Offset by Gains in Wireless Segment

The Dallas telecommunications giant benefited from the first full quarter of sales of Apple Inc.'s (AAPL) iPhone 3GS as new customers and existing subscribers snapped up the smart phone. But the weak job market and the increasing move to wireless or cable-powered phone option meant a weaker traditional phone offering with no change in sight.

"Wireline voice continues to be a problem for the company," said Todd Rosenbluth, equity analyst at Standard & Poors. "They are losing customers, and its hard to get them back."

AT&T posted earnings of $3.2 billion, or 54 cents a share, down from $3.23 billion, or 55 cents a share, a year earlier. The latest results included a benefit of 3 cents a share from the resolution of tax issues, mostly offset by severence charges of 2 cents a share, The Wall Street Journal reports.

For the period, AT&T posted a profit of $3.19 billion, or 54 cents ashare, on revenue of $30.9 billion.

That is down from a profit of $3.23 billion, or 55 cents a share, on revenue of $31.3 billion in the third quarter of last year.

AT&T experienced a net gain of 240,000 AT&T U-verse TV subscribers in the third quarter, resulting in 1.8 million customers with the service. The company also experienced its “best-ever” third-quarter postpaid wireless subscriber churn rate — the rate at which customers drop its wireless service for another carrier's service — of 1.17 percent, Bizjournals.com reports.

It was also repported, AT&T has kept adding wireless users by focusing on Web- equipped devices like Apple Inc.’s iPhone, the top-selling U.S. consumer smart phone in the second quarter. Most of the company’s new contract subscribers were iPhone users, said Chris Larsen, a New York-based analyst at Piper Jaffray Cos.

“Wireless sales overall were strong,” said Larsen, who rates AT&T “overweight” and doesn’t own the shares. “What happened? They sold the iPhone.”

AT&T plans to spend up to $18 billion this year on its network, partly on making its third-generation network twice as fast. Verizon Wireless is upgrading by switching to new technology called long-term evolution, designed to let customers access the Internet and data features at high speeds. Verizon plans to make it available in some markets next year, Bloomberg reports.