By Crayton Harrison

Oct. 23 (Bloomberg) -- AT&T Inc., the biggest U.S. telephone company, posted a 41 percent increase in third-quarter profit, buoyed by sales of Apple Inc.'s iPhone and savings from $140 billion in acquisitions.

Almost 2 million customers signed up for wireless service, lured by handsets with Internet access. Those users spent more on data services such as text-messaging and video downloads, helping to boost mobile-phone revenue to a record $10.9 billion.

``The phones are exciting, and wireless data is up,'' said Matthew Kelmon, a fund manager at Kelmoore Investment Co. in San Francisco, which oversees about $300 million in assets, including AT&T shares. ``I see this pace continuing.''

Net income rose to $3.06 billion, or 50 cents a share, from $2.17 billion, or 56 cents, a year ago, AT&T said today in a statement. The shares outstanding increased after the company bought BellSouth Corp. in December, causing earnings-per-share to fall from a year ago. Sales almost doubled to $30.1 billion.

The company has saved $2.8 billion so far this year from the BellSouth purchase, under a plan to fire 10,000 workers and cut marketing spending by an undisclosed amount.

Profit was 71 cents excluding some costs, such as acquisition expenses, matching the average estimate of 22 analysts in a Bloomberg survey. Sales excluding some accounting items rose to $30.3 billion. Estimates averaged $30.1 billion.

AT&T rose 85 cents, or 2.1 percent, to $42.02 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have increased 18 percent this year.

Wireless Advances

The company's exclusive deal to sell Apple's iPhone helped lift revenue in the mobile-phone unit by 14 percent. AT&T has activated 1.1 million of the handsets from their June 29 debut through today. Apple cut the iPhone's price by $200 to $399 last month, accelerating sales.

``It brought down the price point to a more normalized level where not only the newest and greatest tech buyer could get it,'' said Jennifer Fritzsche, an analyst at Wachovia Securities in Chicago. She rates AT&T shares ``outperform.'' ``For AT&T it was really a positive.''

Chief Executive Officer Randall Stephenson cut customer turnover in the wireless business and signed a record number of new users to contracts, helping to counter the loss of more home- phone lines. About 1.2 million people agreed to long-term deals, and AT&T now has a total to 65.7 million wireless users.

The rate of turnover, known as churn, fell to 1.7 percent. That's down from 1.8 percent last year and an average of 2.15 percent from the first quarter of 2004 through the second quarter of 2007, according to data compiled by Bloomberg.

Sprint Slides

Apple said yesterday it has sold 1.4 million iPhones through the end of September, with customers purchasing about 250,000 with the intention of altering them for use outside AT&T's network. The Cupertino, California-based company reported a 67 percent jump in fourth-quarter profit yesterday on record computer sales and growing demand for the iPhone.

AT&T, formed from the 2005 merger of SBC Communications Inc. and AT&T Corp., took customers from Sprint Nextel Corp., the third-biggest U.S. wireless provider. Reston, Virginia-based Sprint lost 337,000 users on long-term contracts in the quarter amid complaints of dropped calls and customer service problems.

Verizon Communications Inc., majority owner of No. 2 U.S. mobile-phone service Verizon Wireless, is scheduled to report earnings Oct. 29.

Twenty-six analysts suggest buying AT&T stock, three recommend holding it and one says ``sell,'' according to data compiled by Bloomberg.

Merger Savings

The company ``is clearly going to be in excess'' of its forecast for $3 billion in savings from the BellSouth purchase this year, Richard Dietz, senior vice president of investor relations, said in an interview. He declined to forecast how much the company may save.

About 70 percent of savings have come from firing workers, cutting marketing costs and reducing other operational expenses. The $86 billion BellSouth acquisition has also helped AT&T reduce spending on new equipment by giving it bigger volume discounts from suppliers, Dietz said.

Stephenson is betting sales of wireless and television services will help replace revenue from home-phone customers who are switching to Internet-based calling plans offered by cable providers such as Comcast Corp. Consumer phone lines fell 4.7 percent from a year ago to 35.8 million.

AT&T is spending as much as $6.5 billion over five years to expand its U-verse TV service, which uses Microsoft Corp. software to send video over phone lines. The service crashed on Oct. 21 after problems from a software addition the night before, leaving many customers without cable channels until technicians fixed the glitch later in the day, Chief Financial Officer Richard Lindner said.

AT&T had 126,000 television customers at the end of the quarter, up from 100,000 at the beginning of September. The company is close to surpassing its forecast for 10,000 installations a week by the end of the year, Dietz said.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net .