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AT&T Inc. reported a higher quarterly profit, driven by a rise in wireless margins, as it had to shell out less in subsidies to Apple because it sold fewer iPhones in the quarter.

Its shares rose almost 2 per cent after the news.

AT&T and its rivals had been weighed down by iPhone costs in fourth quarter, when the latest iPhone was launched. While fewer iPhone sales meant weaker subscriber growth for AT&T, it did help the company's wireless service profitability.

In the first quarter AT&T's wireless margin rose to 41.6 per cent based on earnings before interest, tax, depreciation and amortization, from 28.7 per cent in the fourth quarter and 39 per cent in the year-ago quarter.

Its net income rose to $3.58-billion, or 60 cents per share, from $3.4-billion, or 57 cents per share in the year-ago quarter. Consolidated revenue rose nearly 2 per cent to $31.8-billion from $31.25-billion.

The No. 2 U.S. mobile provider added 187,000 subscribers in the quarter, compared with expectations for 193,000 from six analysts surveyed by Reuters. This was much fewer than its bigger rival, Verizon Wireless, which reported 501,000 net additions last week.

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