AT&T reported its U-verse TV and Internet service reached 10 million subscribers during the third quarter, with one of the biggest gains in TV viewers in the history of the service.

The company noted that it remains in the midst of a build-out, called VIP,  that will expand U-verse services to 8.5 million new customer locations, with high-speed broadband going to 57 million or approximately 75 percent of its wireline customer locations.

"We had increased our U-verse broadband customer locations by about 2.5 million this year, with about 1 million of those being video capable. Ultimately, our 8.5 million customer locations will be video enabled," CFO John Stephens said. Top broadband speeds were bumped up to 45 Mbps in about two-thirds of the company's footprint.

"We are moving forward plans for speeds of 75 megabits per second and faster," Stephens saide. "We have also begun deployment of 100 percent fiber broadband network in Austin, Texas that will deliver speeds up to one gigabit per second. So while this will help drive a strong U-verse sales in the third quarter, almost all our gross adds of the third quarter came from non-Project VIP areas. This means that there is even more room for growth. More opportunity as we go forward with our VIP footprint."

The company said it tallied a record number of new broadband customers - 655,000 - almost 60 percent of them U-verse broadband subscribers.  With 265,000 new TV subscribers, AT&T said it had its second-best U-verse TV net adds ever and the most in almost five years.

"We had our first $1 billion U-verse revenue mom in the third quarter and this seven-year-old startup is now a $12 billion annualized revenue stream, growing at more than 28 percent," Stephenson said.

AT&T's third-quarter profit and revenue increased as the nation's largest telecommunications company added more smartphone and broadband subscribers.

AT&T Inc. said Wednesday that its net income was $3.81 billion, or 72 cents per share, in the July-September quarter, up 5 percent from $3.64 billion, or 63 cents per share, in the same period a year ago. Adjusted earnings were 66 cents per share in the latest quarter, a penny above analysts' expectations.

Revenue grew 2 percent to $32.16 billion from $31.46 billion, slightly below what analysts were expecting.

Analysts, on average, had expected revenue of $32.18 billion according to FactSet.

Wireless revenue, which includes equipment sales, grew 5 percent to $17.5 billion. AT&T said it added nearly 1 million net wireless subscribers in the third quarter. It added 566,000 wireless devices to its contract-based plans, which are the most lucrative. Of these 178,000 were smartphones and the rest tablets, which carry lower monthly fees than phones. AT&T is the second-largest cellphone company in the U.S. after Verizon Wireless.

Churn, or the turnover rate for contract-based subscribers, was 1.07 percent during the quarter, down slightly from 1.08 percent a year ago but up from 1.02 percent in the second quarter of this year.

AT&T is benefiting the growing popularity of smartphones and tablet computers, but the company is also facing competition from Verizon Wireless as well as smaller rivals such as T-Mobile and Sprint Nextel Corp. Verizon said last week that it added 1.1 million net retail wireless connections during the quarter. Of that total, 927,000 were connections that involved monthly service contracts, much more than AT&T's 363,000 in the same period.

AT&T also reported a 2 percent increase in operating expenses, to $26 billion from $25.4 billion. The company has been investing in technology to increase home broadband speeds.

Shares of the Dallas-based company slid 3 cents to $35.25 in after-hours trading. The stock had closed up 5 cents at $35.28.

The Associated Press contributed to this story