NEW YORK (AP) — AT&T Inc.'s earnings fell 15 percent in the second quarter as it subsidised a record-setting launch of the newest iPhone. The weak economy also continued to sap its landline business.

The profit beat Wall Street estimates, however, and investors sent AT&T's shares up.

Cutting-edge products like the iPhone and AT&T's new cable TV service continue to do well, said Rick Lindner, AT&T's chief financial officer. But with businesses laying off workers and shutting down offices, AT&T's business services division has suffered.

"The sectors where we've seen the most impact, as you would expect, are finance, transportation and manufacturing," Lindner said.

AT&T has tried to keep pace by cutting its own costs, and reduced its employment by 6,000 workers in the quarter. That followed 8,000 cuts in the first quarter. It now has 289,000 employees.

The country's largest telecommunications provider said yesterday it earned $3.20 billion, or 54 cents per share, in the April to June period. That was down from $3.77 billion, or 63 cents per share, a year earlier.

Analysts polled by Thomson Reuters were expecting earnings of 51 cents per share.

Dallas-based AT&T's revenue fell 0.6 percent to $30.7 billion, matching analyst expectations.

In midday trading, AT&T shares rose 94 cents, or 3.8 percent, to $25.78. While the stock held up well in the market meltdown last fall, it has failed to keep pace with the recent recovery. AT&T has traded between $20.90 and $33.56 over the past year.

AT&T activated more than 2.4 million iPhones in the quarter, and more than a third of those were for customers who were new to the carrier. Apple Inc. and AT&T launched a new model of the phone on June 19.

AT&T, the exclusive US carrier for the device, subsidises each new iPhone by hundreds of dollars, expecting to make the money back in service fees over a two-year contract. AT&T's operating margin in wireless declined to 23.8 percent from 25.5 percent a year ago.

AT&T added a net 1.37 million wireless subscribers, a strong showing in a market that's approaching saturation, and more than analysts had expected. Together with the evident popularity of the iPhone, it could mean that AT&T has benefited at the expense of other carriers this quarter.