Company News

UPDATE 1-AT&T says half a million iPads use its network

* 500,000 AT&T-connected iPads, Q2 iPad sales of 3.7 mln

* AT&T CEO cites record sales of smartphones in Q3

* Broadband better in Q3 than Q2

* Does not see international M&A opportunities

* AT&T shares up 0.6 percent on NYSE (Adds analyst quote, updates share price)

NEW YORK, Sept 21 (Reuters) - About a half a million iPad owners use AT&T Inc's T.N network to connect the Apple Inc AAPL.O tablet computer to the Internet, according to the telephone company's top executive Randall Stephenson.

AT&T, the No. 2 U.S. mobile service, is the only U.S. operator providing cellular connectivity for iPad, of which Apple said it sold 3.27 million units in the second quarter alone.

Pacific Crest analyst Steve Clement said this could indicate that many iPad purchasers aren’t bothering to connect the device to the Internet using the AT&T network.

Since operators such as AT&T are expecting strong growth from gadgets such as tablet computers, this trend could mean the device category will represent less business than expected.

"Half a million at this point would seem low," Clement said. Apple rival Samsung Electronics 005930.KS is banking on several carriers, including AT&T, to help sell its new table device, the Galaxy Tab.

However, AT&T’s Stephenson was upbeat about his company’s wireless business and said he is expecting record sales of smartphones such as the iPhone 4 this quarter.

“In the third quarter we’re on pace to set a record for integrated devices,” Stephenson told the Goldman Sachs Communacopia XIX Conference on Tuesday.

AT&T classes smartphones and devices with computer-like keyboards as integrated devices.

In particular, Stephenson cited devices such as Apple's latest iPhone as well as the BlackBerry Torch from Research In Motion RIM.TO and Samsung's Captivate.

The executive said that about 53 percent of AT&T’s customers carry integrated devices which account for about 80 percent of its sales.

Asked about the company’s wireline business, Stephenson said AT&T is seeing improvements in its wired broadband business in the third quarter after a weak second quarter.

However, the executive said that high unemployment numbers are hurting its enterprise business and that this business would only improve if hiring improves.

Asked if AT&T would consider making any acquisitions overseas, Stephenson said he had looked but could not find any deals that would create new value for the company.

AT&T shares were up 17 cents, or 0.6 percent, at $28.71 on New York Stock Exchange in late-afternoon trading. (Editing by Maureen Bavdek and Richard Chang)