AT&T sees economy recovering in 2nd half

By Ritsuko Ando

NEW YORK (Reuters) - AT&T Inc (T.N: Quote, Profile, Research, Stock Buzz) Chief Financial Officer Rick Lindner said on Thursday he sees the U.S economy improving in the second half of the year, with recovery likely led by the business sector rather than by consumers.

The executive from the top U.S. phone company said consumers will likely need more time to work through mortgage and housing problems, although AT&T is generally more resilient than others in retaining customers in an economic downturn.

"I think we'll see some improvement in the second half," Lindner told the Reuters Global Technology, Media and Telecoms Summit in New York. "I think it will be maybe more business-related than consumer."

"My sense, my gut feel, is that because of oil prices, because of mortgage issues and real estate, it will take a little bit longer to work through the consumer impacts," he said.

AT&T's quarterly profit rose more than 20 percent in the first quarter from a year before, helped by strength in its wireless business, but traditional phone subscribers fell heavily.

Lindner said that the decline was mainly due to consumers shifting to wireless, although a weaker economy and other factors may be contributing to the trend.

"Wireless does not seem to show an impact at this point," he said, when asked whether a weaker economy could hit AT&T's main growth engine. The company's wireless revenue rose 18 percent year-on-year in the first quarter.

Lindner also said that AT&T's plans to roll out its high-speed Internet and video service called U-verse are on target despite worries about mortgage and housing problems.

AT&T plans to build out the network to 17 million homes by the end of 2008, and to 30 million by the end of 2010, and sign up over 1 million U-verse video users by the end of this year.

"What we've said is, we expect to have over a million video customers by end of this year. I feel very confident with that. I think we'll be over that," he said.

THE NEXT I-PHONE

Lindner said AT&T has yet to determine pricing for a hotly anticipated new version of Apple Inc's (AAPL.O: Quote, Profile, Research, Stock Buzz) media-playing iPhone.

"There's not been a product announcement. There hasn't been any pricing decision made. That's yet to come," he said.

AT&T, the exclusive U.S. carrier of the iPhone, has said it expects a next-generation iPhone that runs on faster, 3G networks in the coming months.

Lindner said AT&T has more than 2.5 million iPhone customers, with the average subscriber spending nearly $100 a month on services after shelling out as much as $500 for the phone itself.  Continued...