SAN ANTONIO—Catapulted by its acquisition of BellSouth Corp., AT&T Inc. on Tuesday reported net income of $3.1 billion in the third quarter, 42 percent higher than in the same period last year.
Revenue nearly doubled to $30.1 billion in July through September, from $15.6 billion a year earlier, including growth separate from the merger in its wireless business and its segment that caters to large business customers.
Excluding costs and major acquisitions, the company’s earnings per share would have been 71 cents, in line with what analysts surveyed by Thomson Financial expected. Including those costs, earnings per share were 50 cents. Last year’s third-quarter earnings worked out to 56 cents per share, on a profit of $2.2 billion, because the company had fewer shares outstanding.
AT&T’s stock rose 85 cents, or 2.1 percent, to close at $42.02 Tuesday.
AT&T added 2 million wireless subscribers, the third highest increase in the company’s history, for a total of 65.7 million subscribers. The quarter began two days after the June 29 introduction of Apple Inc.’s iPhone, which operates exclusively on AT&T’s wireless network. About 1.4 million iPhones have been sold in the U.S., according to Apple.
The company also saw continued large gains in wireless data revenue as more customers took advantage of messaging, media bundles and other smart phone features, the company said.
Wireless margins improved as customers layered on data use and as the company continued to move subscribers off older technology, Chief Financial Officer Richard Lindner said in a conference call with analysts
“We had just an excellent quarter in wireless growth,” Lindner said.
AT&T expects to continue double-digit earnings-per-share growth this year and next, he said.
The company’s effort to fend off competition from cable companies with its own television service, called U-verse, delivered over high-speed Internet grew to 126,000 subscribers, up from just 3,000 at the end of 2006.
That service got off to a slow start because of glitches with the relatively untested technology, which uses software provided mostly by Microsoft Corp. U-verse also experienced a systemwide outage Sunday, caused by a software change that affected the database used to track which channels customers receive, Lindner said.
“It didn’t have anything to do with the basic platform or the scaling of the platform,” he said.
Still, the outage renewed concerns that the technology, which is cheaper than the television service rival Verizon Communications Inc. is building, may be plagued with problems.
Zachary Investment Research analyst Patrick Comack said the dependence on software is troublesome.
“It’s a very risky video offering. Eventually, it could be super, but it’s going to have this capacity constraint,” he said.
Rich Dietz, AT&T’s senior vice president for investor relations, said despite the Sunday outage, the company is more confident in the technology now that it’s begun to expand.
“We’re seeing the technology evolve and blossom in a way we weren’t quite sure about,” he said, noting increased capacity on the network.
AT&T, which has grown dramatically with a series of acquisitions, reported Tuesday that cost savings from the mergers continue to be ahead of the company’s original outlook. It expects to save $3 billion this year with the BellSouth buyout, savings that will grow to $5 billion next year and $6 billion in 2009, said Lindner.
He declined to comment on speculation that AT&T might be interested in acquiring Englewood, Colo.-based EchoStar Communications Inc., the operator of DISH Network, which it resells as part of bundled services in the pre-BellSouth service area. But Lindner said the company’s focus is on U-verse, with satellite filling in.
The large scale of AT&T’s existing business and its savings from mergers continue to drive shareholder value, said Stifel Nicolaus analyst Christopher King in a note to investors.
But he said competitor Verizon may be better positioned for the long term.
“We maintain our belief that Verizon, which continues to enjoy superior wireless and video assets in our view, should continue to generate superior, long-term returns as a result,” King said.
For the first nine months of the year, AT&T revenue reached $88.6 billion, up 88 percent from the $47.2 billion last year. Net income, at $8.8 billion, is up 63 percent from the $5.4 billion during the same period last year.
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