AT&T Hits Profit Target, but Revenue Light

The company said it has already benefited from the July 11 introduction of Apple's (AAPL Quote) new iPhone 3G, a product for which it is the exclusive authorized U.S. service provider. Stephenson said the customer response to the iPhone "has been everything we had anticipated and more. This strengthens our wireless business, and it reinforces our positive view of the opportunities ahead for AT&T and the industry."

On the company's conference call, AT&T CFO Rick Lindner said the initial iPhone 3G sales volume in July nearly doubled the 2007 original iPhone launch. "The response and the store traffic have been tremendous," he said. "In the first 12 days, 40% of iPhone 3G sales have been to customers new to AT&T."

As many observers predicted, AT&T saw a sharp decline in its wireline business. Total switched access lines fell 8.1% from a year ago. Operating revenue from its wireline segment slid 2.1% from a year earlier. On the positive side, AT&T said enterprise IP data revenue rose 18.3% from a year ago and 6.9% sequentially.

"True to expectations, wireline results at AT&T were weak ... and access line losses, true to form, were horrible," writes Moffett. "But cost controls in wireline were good, leaving margins much better than expected in wireline overall, and enterprise remains resilient in the face of a weakening economy."

Total broadband connections were anemic, rising by a mere 46,000. That figure is well below the 400,000 broadband adds in the year-ago period and 491,000 additions in the first quarter of 2008.