AT&T posted a smaller-than-expected drop in quarterly profit on improved margins for its wireless service, helped by the iPhone, and strong growth for its video and high-speed Internet service. Subsidies for Apple's iPhone had cost AT&T dearly in recent quarters, but analysts said the partnership is now starting to help rather than hurt profits as users of the touch-screen phone spend heavily on data services. AT&T reported a wireless profit margin of 40.9 percent. AT&T said 1.6 million Apple iPhone customers had activated services on the AT&T network during the quarter, more than 40 percent of whom were new to the telephone operator. Some analysts worry that AT&T, the exclusive U.S. provider for the iPhone, depends too heavily on one device, with an estimated three-quarters of its net new monthly bill-paying customers being iPhone users. AT&T added 284,000 U-verse subscribers in the first quarter, giving it a total subscriber base of 1.3 million.
