By Sheila Dang and Akanksha Rana
(Reuters) - AT&T Inc posted a surprise gain in U.S. wireless subscribers on Wednesday but quarterly profit rose less than expected, held back by its declining satellite TV business, sending its shares down more than 3 percent before the bell.
The second-largest U.S. wireless carrier has been reducing its dependency on the phone business with its $85-billion acquisition of Time Warner this year, but is struggling to grow in the TV market as viewers ditch satellite and cable for cheaper online packages.
AT&T gained a net 69,000 phone subscribers in the United States who pay a monthly bill, compared with analysts' estimates of a net drop of 22,000 subscribers, according to research firm FactSet.
Wall Street analysts watch the so-called "postpaid" subscriber figure because those customers pay a monthly bill and are more valuable to the company.
AT&T lost more satellite TV customers than Wall Street expected, shedding a net 359,000 subscribers, as viewers continue to get rid of pricy TV packages in favor of cheaper streaming video services like Netflix and Hulu. It lost 251,000 in the same period last year.
More From This Section
Analysts expected AT&T to shed 245,000 satellite subscribers, according to FactSet.
The new WarnerMedia segment, which includes Turner and premium TV channel HBO, reported revenue of $8.2 billion during the quarter. It did not provide a year-ago figure.
AT&T closed its purchase of Time Warner on June 14 after winning a court battle against the U.S. Department of Justice, which argued that AT&T-owned DirecTV would use Time Warner content to raise costs for pay TV rivals.
A U.S. appeals court said last week it will hear oral arguments on Dec. 6 for the Justice Department's appeal against the merger.
DirecTV Now, the company's streaming video service that was launched to lure back viewers who had dropped more expensive satellite TV services, added only 49,000 net subscribers, much lower than the 296,000 it added last year. Analysts had expected the service to add 287,000 net customers, according to FactSet.
WarnerMedia recently announced it will introduce a new subscription video service by the end of 2019, anchored by HBO. Within a year, the service will also include original content, WarnerMedia Chief Executive John Stankey previously told Reuters.
Third-quarter net income attributable to AT&T rose to $4.7 billion, or 65 cents per share, from $3.0 billion, or 49 cents per share a year earlier.
Excluding some items, the company earned 90 cents per share, missing analysts' estimate of 94 cents per share, according to Refinitiv data.
Total operating revenue rose 15.3 percent to $45.74 billion, beating analysts' expectation of $45.65 billion.
(Reporting by Sheila Dang in New York and Akanksha Rana in Bengaluru; Editing by Supriya Kurane and Bill Rigby)