Wireless gains, managing costs helps AT&T beat profit estimates

(Reuters) - AT&T Inc reported a better-than-expected quarterly profit as it managed costs and added wireless customers, sending its shares up 2.1 percent in extended trading on Thursday.

The second-largest U.S. wireless carrier earned 69 cents per share, excluding items, 6 cents above the average analyst estimate.

"We have been focused on cost management," Chief Financial Officer John Stephens said on a conference call with analysts.

The company's shares were trading at $34.65.

As the U.S. wireless market reaches saturation, AT&T and its bigger rival Verizon Communications have been fighting off smaller rivals such as T-Mobile US Inc , which has aggressively launched promotions, cheaper price plans and marketing campaigns to attract customers.

To unlock new revenue, AT&T has been expanding its footprint in Mexico after buying the No.3 and No.4 wireless carriers in that country recently.

The company is awaiting regulatory approval of its proposed $48.5 billion acquisition of DirecTV in a bid to create the largest U.S. pay TV company. AT&T is close to wrapping up the deal as U.S. telecom and antitrust regulators have signaled a green light for the merger.[ID:nL1N1012DI

Revenue in the second quarter ended June 30 rose 1.4 percent to $33.02 billion, but missed analysts' average estimate of $33.05 billion, according to Thomson Reuters I/B/E/S.

AT&T said it added 410,000 postpaid subscribers who pay on a monthly basis. Analysts on average had expected net additions of 569,000, according to market research firm FactSet StreetAccount.

It posted total wireless net additions of 2.1 million with tablets, accounting for 600,000 net additions.

The company's average revenue per user (ARPU) was $61.26 per postpaid phone, while analysts polled by FactSet StreetAccount had estimated $57.07.

AT&T also said it had prepaid net additions of 331,000 in the second quarter, while analysts had expected the company to lose 27,000 prepaid customers.

The company has said it expects cost savings from the DirecTV deal of at least $2.5 billion on an annual basis by the third year after the deal closes.

On Tuesday, U.S. Federal Communications Commission Chairman Tom Wheeler said he has recommended that the proposed approval of the deal include conditions such as a requirement that AT&T share with the FCC all traffic exchange agreements it strikes with content and web transit companies.

Despite the deal conditions, "we feel very confident we can make an adequate return on investment," Stephens told analysts.

(Reporting by Subrat Patnaik and in Bengaluru and Malathi Nayak in San Francisco; Editing by Maju Samuel and Bernard Orr)

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