AT&T Inc. reported a 61 percent surge in profits during the second quarter of 2007, thanks to the BellSouth Corp. acquisition and an exclusive deal on Apples iPhone.

The nations largest local phone company said Tuesday its net income totaled $2.9 billion, or 47 cents a share, up from $1.8 billion, or 46 cents, a year ago. AT&T credited the BellSouth deal, which closed in December, for the growth.

Sales also rose 2 percent, reaching $29.8 billion. The numbers were adjusted for the BellSouth purchase, the company said.

Overall, AT&T earned $4.3 billion, or 70 cents per share, during the second quarter. Thats compared to income of $2.3 billion, or 58 cents per share, during the same period in 2006.

This marked AT&Ts ninth consecutive quarter of growth, with particular strength in wireless.

On the wireless side, AT&T saw a net gain of 1.5 million subscribers for a total of 63.7 million. Of the 146,000 iPhone activations, new customers accounted for 40 percent. Total wireless revenue rose 12.7 percent to $10.4 billion. Postpaid wireless churn fell to 1.2 percent, from 1.5 percent a year earlier. Total churn, including prepaid and reseller results, was 1.6 percent, down from 1.7 percent in the second quarter of 2006 and in the first quarter of 2007.

The company also continues pressing forward with its U-verse video initiative. It claimed 51,000 subscribers at the end of June, up from 13,000 at the end of the first quarter. U-verse services now are available in 23 metro areas. Executives said installation times average about seven hours because of technicians lack of experience and, often, the condition of home wiring.

Finally, in wireline, AT&Ts enterprise revenue was driven by IP data revenue. Total enterprise revenue was $4.8 billion, up 2 percent sequentially and down 2.1 percent compared to the year-earlier quarter. Enterprise data revenue, which makes up 49 percent of the category, grew 2.5 percent over the same period in 2006.

AT&T Inc. www.att.com