updated 7/23/2008 9:54:23 AM ET 2008-07-23T13:54:23

AT&T Inc. reported second-quarter financial results on Wednesday that contained signs that the weak economy is catching up to its previously steady results, but investors were pleased.

The nation's largest telecommunications company has had its stock hammered in the last few months by the expectation that economic conditions are catching up to it. The latest results affirmed that, as the company slightly missed analyst revenue expectations and reported an accelerating loss of landline subscribers.

However, investors were apparently expecting worse, and sent AT&T's shares up $1.22, or 3.9 percent, to $32.90 in pre-market trading.

Dallas-based AT&T said sales of Apple Inc.'s second-generation iPhone, for which it is the exclusive U.S. carrier, doubled those of the first iPhone model in the first 12 days of selling.

The latest iPhone went on sale July 11, after the end of the second quarter on June 30, so those sales are not part of the financial results reported Wednesday. AT&T said 40 percent of buyers were new to AT&T.

AT&T earned $3.77 billion, or 63 cents per share, in the three months ended June 30, up from $2.90 billion, or 47 cents per share, in the same period a year ago.

Excluding merger-related one-time charges, AT&T said it earned 76 cents a share. That matched the average estimate by analysts polled by Thomson Financial.

Revenue rose 4.7 percent to $30.9 billion. Analysts expected $31.1 billion in revenue, according to Thomson.

The company ended the quarter with 58.9 million phone lines in service, down 2.6 percent from 60.42 million three months earlier. That's a faster decline that many analysts had expected — David Barden of Banc of America Securities expected a decline of 2.1 percent.

Analysts had been speculating that the weak overall economy would be speeding up line losses not just for AT&T but for phone companies in general in the second quarter. Subscribers were already disconnecting at a rapid pace, moving to wireless service and phone service from cable companies.

AT&T is the first major phone company to report its results for the second quarter, and its results are looked to for an indication of how others, like Verizon Communications Inc. and Qwest Communications International Inc., may have fared.

AT&T added 1.3 million wireless subscribers, less than the 1.5 million added by its largest rival, Verizon Wireless. Potential customers may have been waiting for the new iPhone. AT&T remained the largest wireless company, with 72.8 million customers compared to Verizon Wireless' 68.7 million.

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