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AT&T (T - Free AT&T Stock Report), the largest telecommunications outfit in the United States, has posted first-quarter results roughly in line with our estimates. Indeed, share net of $0.57 for the period nearly matched our $0.58 call, as strong wireless subscriber trends offset higher handset subsidies and somewhat sluggish enterprise demand on the wireline side of the business. This performance left traders on Wall Street wondering what to do with these high-profile shares, as evidenced by the Dow component's muted reaction to the financial report.

Perhaps the most significant news in the first-quarter release was the continued strength in iPhone sales. While many analysts feared that iPhone activations would decelerate materially after AT&T lost its exclusive domestic rights to sell Apple's (AAPL) popular smartphone (rival Verizon (VZ - Free Verizon Stock Report) began selling the iPhone 4 in February)), the increased competition seems to have had little negative impact thus far. In fact, AT&T reported an impressive 3.6 million iPhone activations during the March interim, only slightly less than in the fourth quarter of 2010. This should come as a relief to shareholders, as it suggests that the company's mobile momentum, which has fueled growth of late, is far from slowing.

Meanwhile, the wireless business is set to benefit from the launch, over the next several quarters, of a host of new tablets and smartphones powered by Google's (GOOGAndroid operating system. And the legacy wireline operations look to be stabilizing with the help of U-verse, AT&T's new television service. Notably, the video offering is going a long way toward boosting lucrative all-in-one service packages to consumers across the country.

Given the in-line first-quarter results, we are leaving our share-earnings estimates for 2011 and 2012 at $2.35 and $2.60, respectively. We continue to recommend this high-quality stock for conservative, income-oriented accounts. It should hold up well in a choppy market, thanks to AT&T's excellent balance sheet, ample free cash flow, and generous dividend payout.

About The Company: AT&T, formerly SBC Communications, is one of the world’s largest telecom holding companies and is the largest in the U.S. Its traditional (SBC only) wireline subsidiaries provide services in 13 states, including California, Texas, Illinois, Michigan, Ohio, Missouri, Connecticut, Indiana, Wisconsin, Oklahoma, Kansas, Arkansas, and Nevada. The company also owns Cingular (now AT&T Wireless). It has made a number of acquisitions, including PacTel (April 1997), SNET (October 1998), Ameritech (October 1999), AT&T (November 2005), and BellSouth (December 2006). It operates a total number of consumer revenue connections of 45 million. In 2010, about 52% of its sales came from wireless, 23% from wireline voice operations, 22% were from the data segment, and the remainder from advertising.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.