AT&T Activates 4.7M iPhones in 3Q

NEW YORK ( TheStreet) -- AT&T ( T) activated 4.7 million Apple ( AAPL) iPhones during its fiscal third quarter, but wrestled with inventory constraints of the new iPhone 5.

Rival Verizon ( VZ) activated 3.1 million iPhones during its own third quarter , the company said last week.

AT&T posted third-quarter revenue of $31.5 billion, flat compared to the prior year's quarter, and below the consensus estimate of $31.58 billion.

The telecom giant, however, earned 63 cents a share, up from 61 cents a share in the prior year's quarter. Analysts surveyed by Thomson Reuters were looking for earnings of 60 cents.

The Dallas-based firm also reported record free cash flow of $6.5 billion during the quarter. On Wednesday, AT&T also raised its full-year free cash flow guidance by $2 billion to $18 billion or higher.

"We had another impressive quarter with strong earnings growth, record cash flows and solid returns to shareholders through dividends and share buybacks," said AT&T CEO Randall Stephenson, in a statement released before market open. "In wireless, we had another excellent smartphone quarter, penetration of usage-based mobile data plans continues to climb, and our 4G LTE network build is ahead of schedule."

AT&T's wireless revenue climbed 6.6% year over year, with wireless service revenue climbing 4.5% from the prior year's quarter. Within its wireless business, the company added 151,000 postpaid net subscriber additions, although this was significantly less than the 1.5 million added by Verizon during its third quarter.

In its statement, AT&T explained that its postpaid results were impacted by iPhone 5 inventory constraints, which meant that the vast majority of third-quarter iPhone sales went to existing customers.

Nonetheless, AT&T said that it enjoyed "strong" overall smartphone sales of 6.1 million during the third quarter, boosted by record sales of Google ( GOOG) Android and Microsoft ( MSFT) Windows smartphones.

AT&T shares rose 0.43% to $35.15 in premarket trading.

--Written by James Rogers in New York.

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