AT&T Inc. (T) second-quarter earnings rose 8.7% as a lower customer turnover rate helped to improved margins.
AT&T has been adding fewer contract wireless customers in recent quarters as smartphone purchases have slowed since people rushed to buy the new Apple Inc. (AAPL) iPhone 4S in October. But the rate at which customers leave, known as churn, has been improving. AT&T is targeting alternative devices such as tablets and e-readers for new sources of revenue and is working to squeeze more out of existing customers through new services and fees, such as device-upgrade levies. AT&T also is continuing to shift attention away from its legacy businesses. In May, it sold a majority stake in its Yellow Pages business to private-equity firm Cerberus Capital Management LP in a $950 million deal.
AT&T reported a profit of $3.9 billion, or 66 cents a share, up from $3.59 billion, or 60 cents, a year earlier. Revenue edged up 0.3% to $31.58 billion.
Analysts polled by Thomson Reuters had most recently forecast earnings of 63 cents on revenue of $31.7 billion.
Operating margin rose to 21.6% from 19.6%.
In the latest period, AT&T added 320,000 customers who signed long-term service contracts, compared with 331,000 additions a year earlier and 187,000 additions in the first quarter. The company also added 1.3 million total wireless subscribers, pushing its base to 105.2 million, up 6.7% from a year earlier.
Total postpaid churn, or customers who cancel services, was 0.97%, down from 1.15% a year earlier and 1.1% in the prior quarter.
Total wireless revenue, including equipment sales, rose 4.8%, while wireless-service revenue grew 4.3%. Total data revenue increased 7.8% and voice revenue was down 10%.
The company sold 5.1 million smartphones, representing 77% of postpaid device sales.
Shares were trading 1.3% higher at $35.85 premarket. The stock has risen 17% over the past year through Monday's close.
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