Amazon.com Inc. has been selling Kindle e-readers that use AT&T's network, but its new flagship device, the Kindle Fire, only uses Wi-Fi.
Weak subscriber figures are usually good for a phone company's earnings in the short term because it doesn't have to subsidize new devices.
The company's net income for the January-March period was $3.6 billion, or 60 cents per share, up 5 percent from $3.4 billion, or 57 cents per share, a year earlier.
Analysts polled by FactSet were on average expecting earnings of 57 cents per share for the latest quarter.
In particular, AT&T saved money by selling fewer iPhones than analysts expected. AT&T subsidizes each new iPhone by hundreds of dollars, hoping to make the money back over time in the form of service fees.
AT&T said it activated 4.3 million iPhones in the first quarter. That was down from 7.6 million in the fourth quarter, when AT&T began selling the iPhone 4S. However, the number was still up from the 3.6 million iPhones AT&T sold in the same quarter a year ago.
Revenue was $31.8 billion, up 2 percent from a year earlier. It matched analyst expectations.
AT&T shares rose $1.11, or 3.6 percent, to close at $31.72. The shares are close to the four-year high of $31.97 hit a month ago.
Macquarie Securities analyst Kevin Smithen said the strong first-quarter earnings could mislead investors. He said he believes AT&T's profits will shrink this year as it upgrades more handsets, even as it continues to lose market share to Verizon.
Craig Moffett, an analyst at Sanford Bernstein, was more optimistic, saying the first-quarter results demonstrated "the successful handoff from growth to profitability." It's possible, he said, that AT&T will be able to wring more money out of each wireless subscriber through data usage fees. It also looks like the company is getting better at reining in smartphone subsidies, he said.
Peter Svensson can be reached at http://www.twitter.com/petersvensson
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