updated 10/23/2007 12:21:07 PM ET 2007-10-23T16:21:07

AT&T Inc., the nation’s largest telecommunications company, on Tuesday reported net income of $3.1 billion in the third quarter, a 42 percent jump from the previous year before its acquisition of BellSouth Corp. was completed.

The profit, which amounted to 50 cents per share, compared with $2.2 billion earned in the July-September period last year. The year-earlier earnings worked out to 56 cents a share because the company had fewer shares outstanding.

Revenue nearly doubled to $30.1 billion in the third quarter from $15.6 billion a year earlier.

Excluding costs and accounting effects of major acquisitions, the company’s earnings per share would have been 71 cents, in line with what analysts surveyed by Thomson Financial expected.

AT&T’s stock rose 44 cents to $41.61 in afternoon trading.

Although most of the dramatic quarterly gains were the result of the completed merger, AT&T reported continued growth in its wireless revenue.

It added 2 million subscribers, the third highest increase in the company’s history, in the first full quarter since the introduction of Apple Inc.’s iPhone, giving AT&T a total of 65.7 million subscribers, the report said.

The company also saw continued large gains in wireless data revenue as more customers took advantage of messaging, media bundles and other smart phone features, the company said.

Wireless margins improved as customers paid for more data and as the company continued to move customers off older technology, Chief Financial Officer Richard Lindner said in a conference call with analysts

“We had just an excellent quarter in wireless growth,” Lindner said.

AT&T expects to continue double-digit earnings-per-share growth this year and next, he said.

The company’s effort to fend off competition from cable companies with its own television service delivered over high-speed Internet, U-verse, grew to 126,000 subscribers, up from just 3,000 at the end of 2006.

That service got off to a slow start because of glitches with the relatively untested technology. U-verse was hit with a systemwide outage on Sunday, caused by a software change that affected the database used to track which channels customers receive, Lindner said.

“It didn’t have anything to do with the basic platform or the scaling of the platform,” he said.

U-verse subscribers are being offered some credits to compensate them for the outage, he said.

AT&T, which has grown dramatically with a series of acquisitions, reported Tuesday that cost savings from the mergers continue to be ahead of the company’s original outlook. It expects to save $3 billion this year with the BellSouth buyout, savings that will grow to $5 billion next year and $6 billion in 2009, said Lindner, who noted those savings would likely be a “baseline” for what the combined company can save.

He declined to comment on speculation that AT&T might be interested in acquiring EchoStar Communications Inc., the operator of DISH Network, which it resells as part of bundled services in the pre-BellSouth service area. But Lindner noted the company’s focus is on U-verse, with satellite serving as a fill-in.

For the first nine months of the year, AT&T revenue reached $88.6 billion, up 88 percent from the $47.2 billion last year. Net income, at $8.8 billion, is up 63 percent from the $5.4 billion during the same period last year.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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