AT&T Profit Tops Views, but Mainstream Subscriber Growth Slows -- Update

By Chelsey Dulaney 

AT&T Inc. on Thursday reported better-than-expected adjusted earnings growth in the second quarter, though revenue narrowly missed expectations as foreign-exchange impacts weighed.

Shares gained 2.4% in after-hours trading.

The Dallas telecom giant is attempting to diversify its business with its $49 billion acquisition of DirecTV. Announced last May, federal regulators are now poised to approve the deal after a review process that lasted more than 12 months.

The acquisition will make AT&T the nation's largest pay-television provider at a time when companies are navigating huge shifts in television as video consumption moves online.

Meanwhile, AT&T's subscriber growth has weakened recently as it faces greater competition from smaller rivals such as T-Mobile U.S. Inc. and Sprint Corp.

In the latest quarter, AT&T added 410,000 mainstream wireless subscribers, down sharply from the 1.03 million it added a year earlier. Much of AT&T's growth has been driven recently by tablet subscribers, which are generally less lucrative than phones. AT&T said total wireless net additions were 2.1 million for the quarter.

"These results reaffirm our transformation strategy," said Chief Executive Randall Stephenson in a news release.

AT&T said its churn, or the rate at which postpaid wireless customers left its network, was 1.01%, compared with 0.86% a year earlier.

Overall, AT&T reported a profit of $3.04 billion, or 58 cents a share, down from a profit of $3.55 billion, or 68 cents a share, a year earlier. Excluding items, per-share earnings grew to 69 cents a share from 62 cents a share a year earlier.

Revenue edged up 1.4% to $33.02 billion.

Analysts polled by Thomson Reuters had forecast 63 cents a share in earnings on $33.04 billion in revenue.

Revenue in the wireless business grew 2.1% to $18.3 billion, while revenue from the wireline business fell 2.9% to $14.2 billion.

Write to Chelsey Dulaney at [e-mail]

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