AT&T's U-verse holds steady in Q2

Firm's revenue falls slightly compared to last year

NEW YORK -- AT&T continued to sign up customers to its U-verse TV service at a healthy pace in the second quarter, but the telecom giant added fewer subscribers than in the previous quarter for what seems to be the first time since the service's launch.

The weakened growth is a sign that the recession, the challenged U.S. housing market and/or seasonality are having some impact on the fast-growing service that has competed more aggressively with cable operators during the past year.

In its quarterly earnings report Thursday, AT&T reported a net increase of 248,000 users for U-verse to bring its total subscriber base to 1.6 million. Sanford Bernstein analyst Craig Moffett called the figures "a touch light." He had forecast a gain of 278,000 for the period.

U-verse has added more than 1 million TV subs with accelerating momentum during the past year.

For cable operators, the second quarter traditionally is the weakest in terms of sub momentum because of seasonal circumstances, such as the moves of students and snowbirds. For the recently ended second quarter, several cable firms, such as Comcast and Time Warner, have flagged particular weakness tied to the challenges of the U.S. housing market and economy.

AT&T management said this year that it still wants to hit its U-verse deployment target of 30 million. But it will do so in 2011 rather than next year to conserve cash in a tough credit market.

Overall, AT&T on Thursday posted a second-quarter profit of $3.2 billion, compared with nearly $3.8 billion in the year-ago period. Revenue fell from $30.87 billion to $30.73 billion but exceeded the average analyst expectation.

The results also underlined the telecom firm's increasing reliance on the success of the Apple iPhone. AT&T reported more than 2.4 million iPhone activations in the latest quarter. More than a third of the iPhone customers were new to AT&T.