By Sinead Carew
NEW YORK (Reuters) - AT&T Inc's
The No. 2 U.S. mobile provider, which is seeking approval to buy T-Mobile USA for $39 billion, added 331,000 net subscribers in the quarter, compared with the average expectation for 91,000 from seven analysts contacted by Reuters.
"The net (subscriber) additions were surprisingly strong," said Mizuho analyst Michael Nelson. "It seems like AT&T really successfully defended its turf after losing iPhone exclusivity."
AT&T shares were up 12 cents at $30.35 on Thursday morning. Nelson noted that the strong results could be overshadowed by investor concern about growing opposition to AT&T's controversial plan to buy T-Mobile USA.
U.S. Sen. Herb Kohl, chairman of the Senate's antitrust subcommittee, urged regulators on Wednesday to block the deal and other lawmakers also expressed concern. The deal would cost AT&T about $6 billion in breakup fees if it is rejected.
AT&T said on Thursday that it still expects the deal to close in the first quarter of 2012 and that U.S. regulators reviewing the transaction are "asking the questions you would expect."
Its results came a day before its bigger rival Verizon Wireless -- a venture of Verizon Communications
In the first quarter of this year, Verizon Wireless started selling iPhone, ending more than three years of AT&T's exclusive rights to sell the device in the United States. While Verizon is expected to add about three times more subscribers than AT&T this quarter as a result, AT&T fared better than expected.
AT&T said iPhone was still its strongest-selling smartphone despite the Verizon competition.
KINDLE WEAKNESS
One wrinkle in the results appeared to be slower than expected sales of connected devices which include the Amazon.com
"Maybe the mix shifted quite a bit to the Wi-Fi only device," said Clement. While many consumers buy e-readers with connections to cellular networks such as AT&T's so they can download books on the run, others make do with cheaper devices that only support Wi-Fi short-range networks found in homes and cafes.
This could be why Amazon announced on July 13 that AT&T would sponsor Kindles with cellular connections -- reducing the price to $139 from $189, Clement said.
AT&T's net profit fell to $3.59 billion, or 60 cents per share, from $4 billion or 67 cents per share a year earlier and compared with analyst expectations for earnings of 59 cents per share, according to Thomson Reuters I/B/E/S.
Excluding a Telmex Internacional
Revenue rose 2.2 percent to $31.5 billion, compared with Wall Street expectations for $31.3 billion, according to Thomson Reuters I/B/E/S.
As well as subscriber numbers Nelson said he was impressed with AT&T's profit margin of 41.1 percent based on earnings before interest, tax, depreciation and amortization. This compared with the analyst's expectation for 39.6 percent.
AT&T said it increased its 2011 capital spending budget to around $20 billion from its previous target of $19 billion to support increasing demand for its wireless services.
(Reporting by Sinead Carew; editing by Derek Caney and Matthew Lewis)
