AT&T, the biggest U.S. phone company, today reported a nearly 10 percent drop in quarterly profit but beat expectations on a hefty increase in wireless revenue and improved performance by Apple's iPhone. 
The Dallas, Texas-based company said its first quarter profit fell to $3.1 billion down 9.7 percent from almost $3.5 billion a year ago.
Despite strong wireless sales, AT&T revenue edged down 0.6 percent to $30.6 billion from $30.7 billion a year earlier.
Total wireless subscribers grew by 1.2 million in the quarter to 78.2 million. Of the new subscribers, nearly three-quarters chose the iPhone.
AT&T has been subsidizing each iPhone by hundreds of dollars with the plan of making its money back on service fees. That strategy started to pay off in the first quarter.
The carrier is the exclusive US distributor of the iPhone.
Apple's iPhone also helped AT&T avoid signing up increasing prepaid services at the expense of more profitable contract-based plans -- a growing trend in the industry.
Only a quarter of new customers at AT&T chose prepaid in the first three months of the year, compared to more than half at T-Mobile.
