AT&T's Net Falls Short (Update)

On the positive side, total broadband connections were better than a quarter ago, rising by 148,000. That figure is well above the 46,000 broadband adds in the second quarter but sank from the 499,000 additions in the third quarter of 2007.

AT&T's U-verse service also saw strong growth in the quarter. Net subscriber additions totaled 232,000, up sharply from a year ago and nearly 36% sequentially. Those customer additions pushed AT&T's total U-verse subscriber count to 781,000 at the end of the quarter.

In terms of the macroeconomic slowdown affecting enterprise and business segments, voice usage and some data transfer have declined. Those losses were offset by 15.4% growth in wireless revenue and 16.2% growth in IP data revenues, CFO Rick Linder said during the conference call.

"Our business mix is more resilient than most," Lindner said. "I believe we have the best assets in the telecom industry. These are obviously challenging times. In this environment, we feel it's prudent to be conservative." As such, Lindner said that AT&T will use available free cash flow after dividend payments to pay down debt for the remainder of the year.

Sanford Bernstein analyst Craig Moffett argued that while it is easier to focus on all of the positives on the wireless side of the business, more questions about the wireline side and the brewing economic storm should be cause for concern.

"Wireline results were a clear disappointment, and appear poised to further deteriorate as economic conditions worsen," Moffett said in an email. "Enterprise fell to -1.4% growth (versus our expectation of +1.0%), and can be expected to slow even more as IT spending winds down and GDP growth slows. Margins, too, were weak across the board."