Acquisitions, iPhone help lift AT&T’s quarterly profit 41%

AT&T Inc., the nation’s biggest telephone company, on Tuesday reported a 41% increase in third-quarter profit, buoyed by sales of Apple Inc.’s iPhone and savings from $140 billion in acquisitions of BellSouth Corp. and other companies

Almost 2 million customers signed up for wireless service, lured by handsets with Internet access. Those users spent more on data services such as text messaging and video downloads, helping to boost mobile phone revenue to a record $10.9 billion.

“The phones are exciting, and wireless data is up,” said Matthew Kelmon, a fund manager at Kelmoore Investment Co. in San Francisco, which oversees about $300 million in assets, including AT&T shares. “I see this pace continuing.”

Quarterly net income rose to $3.1 billion, or 50 cents a share, from $2.2 billion, or 56 cents, a year earlier. The shares outstanding increased after the company bought BellSouth in December, causing earnings per share to fall from a year earlier.

Sales almost doubled to $30.1 billion from $15.6 billion.

The company has saved $2.8 billion this year from the BellSouth purchase under a plan to fire 10,000 workers and cut marketing spending by an undisclosed amount.

The company’s exclusive deal to sell Apple’s iPhone helped lift revenue in the mobile phone unit by 14%. AT&T has activated 1.1 million of the handsets since their June 29 debut. Apple cut $200 from the iPhone’s price to $399 last month, accelerating sales.

“It brought down the price point to a more normalized level where not only the newest and greatest tech buyer could get it,” said analyst Jennifer Fritzsche at Wachovia Securities. “For AT&T, it was really a positive.”

The company also cut customer turnover in the wireless business and signed up a record number of new users, helping to counter the loss of more land-line phones in homes. About 1.2 million people agreed to long-term deals, and AT&T now has a total of 65.7 million wireless users.

The rate of turnover, known as churn, fell to 1.7%. That’s down from 1.8% a year earlier.

Chief Executive Randall Stephenson is betting sales of wireless and television services will help replace revenue from home-phone customers who are switching to Internet-based calling plans offered by cable providers such as Comcast Corp. Consumer phone lines fell 4.7% from a year earlier to 35.8 million.

AT&T is spending as much as $6.5 billion over five years to expand its U-verse TV service, which uses Microsoft Corp. software to send video over new, hybrid fiber-optic and copper lines. The service crashed Sunday after a software addition the night before, leaving many customers without cable channels until technicians fixed the glitch later in the day.

AT&T had 126,000 television customers at the end of the quarter, up from 100,000 at the beginning of September.

AT&T shares rose 85 cents to $42.02.