April 24 (Bloomberg) -- AT&T Inc., the largest U.S. phone company, said first-quarter profit almost doubled after it reaped $900 million in savings from takeovers.

Net income increased to $2.85 billion, or 45 cents a share, from $1.45 billion, or 37 cents, a year earlier, San Antonio- based AT&T said today in a statement. Sales rose 84 percent to $29 billion.

AT&T trimmed marketing, network and administrative expenses in its first full quarter since completing the $86 billion purchase of BellSouth Corp. The company recruited a smaller percentage of wireless users who pay in advance for their service, causing customer additions to miss some analysts' estimates.

``AT&T is, at this point, a cost-cutting, margin-improvement type of story,'' said Christopher King, an analyst at Stifel Nicolaus & Co. in Baltimore who rates the shares ``hold.'' ``On the other hand, you do have legitimate concerns about top-line growth,'' including the subscriber shortfall, he said.

Shares of AT&T, which changed its name from SBC Communications Inc. after the 2005 purchase of AT&T Corp., declined 67 cents, or 1.7 percent, to $39.10 at 4:02 p.m. in New York Stock Exchange composite trading. The stock has gained 53 percent in the past 12 months.

Margin Improvement

AT&T raised a forecast for its 2007 operating profit margin to a range of 23 percent to 24 percent, up from a range of 21 percent to 23 percent.

Savings from the BellSouth acquisition totaled $300 million in the first quarter, while the AT&T-SBC merger contributed an additional $600 million in cost reductions. Excluding some items, profit was 65 cents a share, exceeding the 61-cent average of analyst estimates compiled by Bloomberg.

The BellSouth purchase gave AT&T Chief Executive Officer Ed Whitacre full control of Cingular Wireless, which is changing its name to AT&T to lower marketing costs. The biggest U.S. mobile- phone service provider added 1.2 million subscribers, missing UBS AG analyst John Hodulik's estimate of 1.5 million.

AT&T added more mobile-phone customers who commit to monthly contracts rather than those who pay in advance for calling time during the quarter. The rate at which it lost customers fell to 1.7 percent from 1.8 percent in the previous three months.

``These are higher-margin customers,'' said Todd Rosenbluth, an analyst at Standard & Poor's Equity Research in New York. He rates AT&T shares ``hold.'' ``They're loyal to your brand. When they look to use services, they're going to stick with you.''

`No Slowdown'

AT&T normally experiences a drop in the first quarter of customers who pay in advance, in part because some don't buy new minutes after the holiday season, Chief Financial Officer Rick Lindner said in an interview. This year, the company also lost 90,000 to 100,000 pre-paying wireless customers because it phased out older network technology, he said.

``There's no desire to slow down the business,'' he said. ``We're pleased with our prepaid results.''

AT&T accelerated a share buyback plan today, saying it will complete $10 billion of repurchases by the third quarter instead of the end of 2007. The company bought 81 million of its shares for $3 billion in the first quarter.

TV Expansion

Whitacre is counting on growth in wireless and TV services as customers drop their home-phone lines in favor of mobile phones or digital voice plans from cable companies such as Comcast Corp.

About 187,000 users signed up for AT&T's TV plans in the first quarter, the company said today. AT&T offers satellite video through partners DirecTV Group Inc. and EchoStar Communications Corp. and sells its own TV service, called U- verse, over its phone lines in 15 U.S. markets.

The company said last week it is adding U-verse customers at a rate of 2,000 per week. The company is expanding the service this year after software bugs delayed it in 2006.

``They definitely appear to be committed,'' said Le Keough, a portfolio manager with Frost Bank in Austin, Texas, who doesn't directly own AT&T shares. ``It's good they're going out there and opening offices and signing up customers.''

AT&T's 5.1 percent notes maturing in 2014 rose 0.03 cent on the dollar to 98.32 cents, according to Trace, the bond price reporting system of the NASD. The yield shrank to 5.38 percent.

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

Last Updated: April 24, 2007 16:18 EDT