AT&T profit rises on wireless, iPhone disappoints

By Ritsuko Ando

NEW YORK (Reuters) - AT&T Inc. (T.N: Quote, Profile, Research, Stock Buzz) on Tuesday posted a higher-than-expected quarterly profit on strong wireless subscriber growth, but failed to excite investors as the first two days of iPhone sales fell short of forecasts.

AT&T, the sole U.S. service provider for Apple's first phone, said it activated 146,000 iPhone subscribers in the first two days after launch on June 29.

"They likely sold many more phones than they activated," said Cross Research analyst Shannon Cross. "That being said, the Street was probably around 250,000, so it's maybe a bit light."

AT&T shares were mostly flat in afternoon trade, but shares of Apple Inc. (AAPL.O: Quote, Profile, Research, Stock Buzz), which makes the eagerly anticipated device, were down about 2 percent.

AT&T, the top U.S. telecommunications service provider, said second-quarter net profit rose 61 percent to $2.9 billion, or 47 cents a share, from $1.8 billion, or 46 cents a share, a year earlier.

On an adjusted basis, which excludes costs and accounting effects from acquisitions, profit rose to 70 cents per share from 58 cents per share. That beat the average analysts' forecast of 67 cents, according to Reuters Estimates.

Revenue rose to $29.5 billion from $15.8 billion. It bought BellSouth Corp. late last year, consolidating ownership of their Cingular Wireless venture.

Adjusted revenue, which combines sales from AT&T, BellSouth and Cingular Wireless in both periods, rose 2 percent to $29.8 billion, in line with market expectations.