AT&T Rings True

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Perfect pitch. That's what they call it when you can flawlessly sing or identify a specific note upon request.

This morning's earnings report from AT&T (NYSE: T) showed that the mother of all telecoms can hit the mark and hold a tune with the best of them. While it fell short on revenue and wireless-subscriber-growth expectations, AT&T turned in bottom-line results exceeding average analyst expectations, and sang a siren song of fundamental improvements in operations.

Overall, AT&T reported $29 billion in revenue for the quarter, and converted this to $2.8 billion in net income. Excluding merger-related costs, the company turned in earnings of $0.65 per share, $0.04 above the mean analyst expectation, on revenue that was just a hair shy of the average prediction of $29.6 billion.

The company continued to improve upon a number of operating metrics, showing that it's doing a better job of meeting customers' needs with fewer and fewer resources. On the wireless side of the business, customer churn continued to tick down to a reported 1.7% for the quarter, well below the 1.9% year-ago figure. Average revenue per user (ARPU) rose a slight 1.4% year over year to $49.21. These improvements helped AT&T inch closer to wireless-metric king and rival Verizon Wireless, a joint venture between Verizon (NYSE: VZ) and Vodafone (NYSE: VOD), which sports a similar ARPU but a much lower 1.1% churn rate.

As expected, pro forma revenue for the wireline side of AT&T's business continued to decline, as many customers either made the full switch to wireless or took the bait on Internet telephone offerings from troubled Vonage (NYSE: VG) or eBay's (Nasdaq: EBAY) Skype. Competing digital telephone plans from cable companies Comcast (Nasdaq: CMCSA) and Time Warner Cable  (NYSE: TWC) are also stealing voice customers, but that rate of attrition is moderate, and more than replaced by customers signing up for high-speed DSL and video services.

The only sour notes in AT&T's quarterly performance were tempered growth in wireless customers and the aforementioned, greater-than-expected loss of fixed-line subscribers. Those misses turned its crescendo of improving margins businesswide into a B-flat, as the stock dipped today by 1.5%. But while investors should beware a potential slowdown in the growth of the lucrative wireless business, the improving fundamentals at AT&T should be music to the ears of Fools invested for the long haul.

Further Foolishness:

• Companies You Should Buy Right Now
• Foolish Forecast: AT&T's Wireless Ways
• Foolish Fundamentals: Service Provider Metrics

AT&T has a four-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock-rating service by joining today. It's free!

Fool contributor Dave Mock holds a tune about as well as the alley cats. He owns no shares of companies mentioned here. Vodafone is a Motley Fool Inside Value pick. eBay is a Stock Advisor recommendation. Dave is the author of The Qualcomm Equation. The Fool has a disclosure policy.