May 30 (Bloomberg) -- AT&T Inc. Chief Operating Officer Randall Stephenson said expectations are ``too low'' for Apple Inc.'s iPhone, which his phone company will start selling next month.

``The iPhone is going to be a game changer,'' Stephenson said today at an investor conference in New York. ``I don't know what your expectations are for the iPhone, but I would tell you they're probably too low at this point.''

The iPhone, which blends a mobile phone with the iPod music player, has attracted interest from more than 1 million customers, he said. Apple expects to sell 10 million iPhones in 2008, and AT&T won exclusive rights to distribute the product in the U.S. after its introduction in June.

AT&T's mobile-phone unit, formerly known as Cingular Wireless, plans to use the iPhone to recruit subscribers who will stay loyal and spend more on data. San Antonio-based AT&T has 62.2 million wireless customers, the most in the U.S.

Shares of AT&T rose 49 cents, or 1.2 percent, to $40.98 at 4:01 p.m. in New York Stock Exchange composite trading. Apple, based in Cupertino, California, advanced $4.42, or 3.9 percent, to $118.77 on the Nasdaq Stock Market.

Stephenson, who will replace Edward Whitacre on June 3 as AT&T's chief executive officer, said mainstream wireless users are interested in complex gadgets that used to appeal only to technology enthusiasts.

Competitors such as Basking Ridge, New Jersey-based Verizon Wireless, the second-largest U.S. mobile-phone service, and Sprint Nextel Corp., the third-biggest, are readying for the iPhone's debut.

Verizon Wireless plans to introduce a device this summer to compete with the iPhone, USA Today reported last week, citing Denny Strigl, president of Verizon Communications Inc., which co- owns Verizon Wireless with Vodafone Group Plc.

Sprint, based in Reston, Virginia, last month introduced the ``Upstage,'' a device made by Samsung Electronics Co. that has a music player on one side and a phone on the other.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net

Last Updated: May 30, 2007 16:13 EDT