Updated from 8:15 a.m. EDT

AT&T ( T) fell short of Wall Street's earnings target for the third quarter, as the wireless division was impacted by strong performance from the Apple ( AAPL) iPhone 3G.

The U.S. phone giant said net income rose to $3.23 billion, or 55 cents a share, in the quarter, up from $3.06 billion, or 50 cents a share, in the year-ago period. Excluding noncash merger-related amortization expenses, AT&T said it had adjusted earnings of 67 cents a share. Analysts expected the company to notch a profit of 71 cents a share, according to Thomson Reuters.

Earnings were impacted by the July 11 introduction of Apple's new iPhone 3G, a product for which it is the exclusive authorized U.S. service provider. The iPhone 3G initiative reduced pretax third-quarter earnings by about $900 million, or 10 cents a share, as part of the subsidy agreement AT&T has with Apple. AT&T also saw a 2-cents-a-share loss because of hurricane damage.

Third-quarter activations of the iPhone 3G totaled 2.4 million, 2.4 times results for the original iPhone through the end of the third quarter in 2007. Roughly 40% of iPhone 3G activations in the third quarter were for wireless customers who were new to AT&T.

As AT&T expects strong iPhone 3G activations to continue, its dilution associated with the iPhone 3G will run above its previous expectation. AT&T said it now expects its full-year 2008 wireless service operating income before depreciation and amortization, or OIBDA, margin to be better than 37% versus its previous outlook of 39% to 40%. AT&T also expects its full-year adjusted consolidated operating income margin to be about 23%, compared with its previous outlook of about 24%.

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