updated 4/25/2006 11:07:14 AM ET 2006-04-25T15:07:14

AT&T Inc. said Tuesday its earnings rose 63.3 percent in the first quarter, the first period it reported combined results after SBC Communications Inc.’s acquisition of AT&T Corp., which closed late last year.

Net income was $1.445 billion, or 37 cents a share, for the January-March period, up from SBC’s earnings of $885 million, or 27 cents a share, in the same period last year.

Excluding the costs of SBC’s acquisition of AT&T Corp. and Cingular Wireless LLC’s acquisition of AT&T Wireless, earnings were 52 cents a share, beating the average estimate of analysts polled by Thomson Financial by 3 cents.

Revenue came to $15.8 billion, up 55 percent from $10.2 billion the previous year.

As expected, results were strong at Cingular, which reported its first-quarter earnings last week along with Atlanta-based BellSouth Corp., which owns 40 percent of the venture. San Antonio-based AT&T Inc. owns the rest.

Cingular, already the country’s largest cell-phone carrier, ended the quarter with 55.8 million subscribers, up 5.5 million from a year ago, and contributed $287 million to AT&T’s income. Its revenue of $9 billion was not counted in AT&T’s revenue.

Revenue in the traditional wired phone business was $14.7 billion, down 5.5 percent from SBC’s and AT&T’s combined results a year ago. The decline was due mainly to the continued free fall of the former AT&T Corp.’s consumer long-distance business. Even before the merger, AT&T stopped marketing the service due to dwindling margins and competition from regional phone companies like SBC.

The number of phone lines served also declined, to 49 million phone from 52 million, due to competition from cell phones, cable and Internet calling. However, this was offset by added revenue from data services. AT&T added 511,000 broadband digital subscriber lines, for a total of 7.4 million.

AT&T chief executive Ed Whitacre said the integration of AT&T Corp. and SBC was going according to plan. The front-line sales force has been combined, and plans for integrating the networks are in place. Whitacre still expects the merger to save $600 million to $800 million this year.

Even as the former SBC is digesting its acquisition of AT&T Corp., it has announced another mega-merger. In March, AT&T announced a deal to buy BellSouth for $67 billion. The deal was initially expected to close by March 2007, but the companies said last week that they now expect the deal to close by the end of this year. A major reason for the deal is that it would give AT&T full control of growth engine Cingular.

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