AT&T posted lower net income in its second quarter due to cheaper cellphone plans it introduced as a response to aggressive pricing from smaller competitor T-Mobile US. U-verse revenue growth of 24.5 percent year-over-year wasn’t enough to push AT&T’s entire wireline segment to positive revenue growth.  

AT&T said it added 488,000 high speed Internet subscribers, including 55,000 business customers. AT&T broadband subscribers continue to migrate away from DSL, but not all of them are shifting to U-verse; the company was down 55,000 subscribers from its Q1 total. U-verse broadband now represents about 70 percent of its total broadband business.

The company said it also added 190,000 U-verse TV subscribers, for a new total of 5.9 million. That’s roughly on par with the number of adds in the last few quarters.

Second quarter segment revenue at AT&T Wireline was down 0.9 percent from its Q2 a year ago. U-Verse revenue now represents 62 percent of AT&T’s consumer wireline revenue and is quickly replacing legacy voice and data products.

The company said the economy is still a constraint on business services growth.

AT&T executives said little about the proposed acquisition of DirecTV, other than to note that it has received approval of the deal from Brazil, and from some of the individual U.S. states.

AT&T said half of its wireless subscribers have already moved to "Mobile Share Value" plans, introduced in February. It's also adding subscribers to its Next plans, which carry lower monthly fees because customers pay full price for their phones.

On a conference call with analysts, executives defended the new Next and Mobile Share Value plans, saying they boosted the number of new customers to the highest level in five years.

"We are very pleased with what we're seeing from our wireless repositioning, and we're confident in our strategy," said John Stephens, AT&T's chief financial officer.

Investors took the news mostly in stride. AT&T shares fell 51 cents to $35.37 in extended trading after the release of the results.

The Dallas company said it earned $3.55 billion, or 68 cents per share. That was down from $3.82 billion, or 71 cents per share, in the same quarter last year.

Excluding some one-time items, AT&T's earnings were 62 cents per share in the latest quarter, a penny shy of the average estimate of analyst polled by FactSet.

Revenue was $32.58 billion, up 1.6 percent from a year ago. Analysts polled by FactSet were expecting $32.24 billion in revenue.

AT&T, the second-largest cellphone company, is dueling with No. 4 T-Mobile US, which has shaken up the industry with innovative pricing plans. T-Mobile has been raking in new subscribers in the last year, but it hasn't yet revealed its results for the second quarter. It reports next week.

AT&T gained a net 1,026,000 customers on its contract-based "postpaid" wireless plans. The last time it posted a quarterly gain of more than a million customers for those plans was in 2009, when it was still the exclusive U.S. carrier of the iPhone.

Most of the net customer gain came from better retention of existing customers rather than recruitment of new ones. AT&T had its lowest-ever "churn" rate in the quarter, a measure of how many customers cancel service.

–The Associated Press contributed to this article