AT&T's net income was up 5.5 percent and revenue up 4 percent from the third quarter of 2007, with the growth driven by wireless subscribers signing up for Apple's new iPhone 3G, the company said Wednesday.

AT&T reported net income of $3.23 billion for the third quarter of 2008, up from $3.06 billion in the third quarter of 2007. Revenue grew from $30.1 billion to $31.3 billion, the company said.

About 2.4 million AT&T customers activated iPhone 3G devices during the quarter, with 40 percent of them new AT&T customers, the company said. Apple rolled out its new iPhone 3G in July, early in the third quarter, and AT&T is the iPhone's exclusive mobile service provider in the U.S.

AT&T's Wireless division posted $12.6 billion in revenue for the third quarter, up more than 15 percent from its $10.9 billion revenue in the third quarter of 2007. Wireless income was up more than 20 percent, from $1.9 billion to $2.3 billion.

"I am particularly pleased with the customer response to the iPhone 3G," Randall Stephenson, AT&T's chairman and CEO, said in a statement. "We're expanding the market, as users adopt more data and media-rich services and access a wide array of applications."

The gains in wireless revenue were nearly offset by drops in wireline revenue. AT&T's wireline operations posted revenue of $17.6 billion, down more than 2 percent from the third quarter of 2007. Net income was down nearly 8 percent. Telecom carriers have seen their wireline revenue drop in recent years, as customers convert to fixed-price long-distance calling plans or dump their wireline phones for mobile service or VoIP (voice over Internet Protocol).

The company did report a 5 percent increase in wireline data revenue, which was $6.4 billion for the quarter.

AT&T reported a net gain of 232,000 customers for its U-verse IP television service, compared to an increase of 170,000 in the second quarter.

The company added 148,000 wireline broadband customers in the quarter. In the second quarter, AT&T reported an increase of just 34,000 consumer broadband subscribers, compared to an increase of more than 365,000 in each of the three previous quarters.

The IDG News Service is a Network World affiliate.