updated 1/25/2007 1:27:05 PM ET 2007-01-25T18:27:05

AT&T Inc. said Thursday that fourth-quarter earnings rose 17 percent, led by growth in wireless subscribers. The telephone company also reported higher cost savings from past mergers and projected significantly higher cost reductions from the just-completed purchase of BellSouth Corp.

For the three months ended Dec. 31, the nation’s largest provider of local phone, cellular and DSL Internet services posted net income of $1.94 billion, or 50 cents a share. In the same quarter a year earlier, earnings totaled $1.66 billion, or 46 cents per share.

Fourth-quarter revenues reached $15.9 billion, a 23 percent increase from $12.9 billion in the final months of 2005.

The earnings report included only two days worth of results from BellSouth, which AT&T acquired for $86 billion in late December, gaining 100 percent ownership of Cingular Wireless and extending the Texas-based company’s local phone territory across the Southeast. As Cingular was still 40 percent owned by BellSouth for most of the fourth quarter, AT&T’s revenue figure didn’t include sales by the cell phone venture.

In its final quarter as an independent company, BellSouth earned net income of $1.2 billion, 29 percent higher than a year earlier . Revenue increased 4.6 percent to $9.1 billion.

AT&T’s latest results included merger expenses from late 2005’s acquisition of the AT&T long-distance business by SBC Communications, which then renamed the combined company AT&T. Excluding those merger expenses, AT&T’s fourth-quarter profit would have been 61 cents per share, surpassing the 59 cents predicted by analysts surveyed by Thomson Financial.

The company noted that full-year savings from the purchase of the AT&T long-distance business totaled $1.1 billion, significantly more than the $600 million to $800 million initially projected.

AT&T also revised its savings projection from the BellSouth takeover, saying it would eliminate between $800 million and $1.2 billion during 2007, up from an earlier prediction of between $500 million to $800 million.

After the report, AT&T’s share price pushed to a 52-week high. The stock was up 39 cents at $37.02 in early afternoon trading on the New York Stock Exchange after shooting as high as $37.70 in the morning.

“Our execution continues to be solid, we closed the year strong, and AT&T has excellent momentum heading into 2007,” said Edward E. Whitacre Jr., chairman and chief executive officer, in a statement.

AT&T also reaffirmed its previous guidance for 2007, saying it expects double-digit growth in earnings per share and growing cash flow.

The new AT&T, which began rebranding Cingular under the AT&T name earlier this month, had strong growth in wireless subscribers, adding a net 2.4 million customers for a total of nearly 61 million.

The wireline segment of the business, which has been declining as customers shift to wireless Internet-based phone service, expanded its regional business revenues and its enterprise Internet data services.

For the year, AT&T reported $7.36 billion in net income, or $1.89 per share, a 54 percent increase over the $4.8 billion, or $1.42 per share, earned in the year-ago period. Revenue was $63.1 billion, a 44 percent increase from the $43.8 billion in 2005.

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