iPhone injects little to AT&T Q2

Profit up 61% overall; video service U-verse adds subs

Telecommunications giant AT&T Inc. reported strong second-quarter subscriber growth for its burgeoning video service Tuesday, but activation numbers for the first weekend of sales for Apple Inc.'s iPhone disappointed Wall Street, pulling down both firms' stocks.

AT&T, which has an exclusive deal with Apple to sell the iPhone in the U.S., said that it activated 146,000 iPhone subscribers in the product's first two days on the market — June 29-30, which also concluded the second quarter.

Analysts estimated that this could mean that 200,000 or more people bought the iPhone during the first weekend of its availability. However, the figures still were below expectations that had been as high as 700,000.

"Expectations were certainly high, but I'm pleased to say that iPhone has truly met them," AT&T CFO Rick Lindner said in a conference call with analysts, shrugging off any investor disappointments.

AT&T also said iPhone sales "continue to be strong in July, with store traffic above historical levels."

Nonetheless, Apple shares, which had been up 69% for the year until Monday, declined 6.1% on Tuesday to $134.89 after going as low as $134.15 in intraday trading. The stock has traded from $72.60-$145.22 during the past year. Apple reports its fiscal third-quarter earnings today.

AT&T shares closed down 0.9% at $39.68 after going as low as $39.20.

Meanwhile, the telecommunications giant said Tuesday that its video service U-verse, which competes with cable and satellite TV providers, showed strong growth in the second quarter, ending it with 51,000 subscribers, up from 13,000 three months earlier. U-Verse-related expenditures were in line with previous estimates, the company said.

"Our U-verse video service has begun to ramp aggressively," AT&T chairman and CEO Randall Stephenson said.

AT&T said that U-verse service is now available in parts of 23 U.S. metro areas. The company's total video connections, which include U-verse and bundled satellite TV service, increased 200,000 in the second quarter to 1.9 million, it said. At quarter's end, 5.9% of AT&T's overall primary consumer lines also had video service from the firm, up from 3.8% a year ago.

Overall, AT&T said its second-quarter profit jumped 61% year-over-year to $2.9 billion. Revenue rose from $15.8 billion to $29.5 billion. Adjusted revenue edged up 2% to $29.8 billion.
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