AT&T earnings beat analyst forecasts

AT&T Inc. posted first-quarter earnings that beat analysts’ estimates on lower smartphone upgrade costs and an increase in wireless data sales related to Apple Inc.’s iPad.

Net income rose 5.2% to $3.58 billion, or 60 cents a share, from $3.41 billion, or 57 cents, a year earlier, Dallas-based AT&T said Tuesday.

Analysts projected 57 cents, the average of estimates compiled by Bloomberg.

Sales rose 1.8% to $31.8 billion, in line with estimates.

AT&T activated 4.3 million iPhones and sold 240,000 tablets, with about 180,000 of the tablets on data plan contracts. That helped boost monthly bills and offset slower subscriber growth in a market in which most people already have mobile phones. While contract-customer gains narrowed from the fourth quarter and trailed those at Verizon Wireless, the increase in average revenue per user beat analysts’ estimates.

AT&T shares rose 3.6% to $31.72. The stock has gained 4.9% this year.

To help cut the costs of phone subsidies to device makers for each unit sold at a loss, AT&T increased its upgrade eligibility period to 20 months from one year in February 2011.

Jonathan Chaplin, a Credit Suisse analyst in New York, said the lower rate of upgrades “is an encouraging result — upgrades and subsidies are the key to margin expansion and better earnings growth for AT&T.”

The U.S. market is nearing saturation after a growth spurt fueled by sales of the iPhone last year. Wireless penetration in the U.S. is 105% when including mobile devices like tablet computers, said Bob Roche, a statistician with CTIA, a wireless-industry trade group.

The slowing market is forcing AT&T into more intense competition with Verizon Wireless and Sprint Nextel Corp., with the carriers fighting over a shrinking pool of people who don’t yet have mobile phones. They’re also trying to get customers to upgrade to smartphones such as the iPhone that let users browse the Web and stream video.