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NEW YORK – AT&T Inc.- on Monday posted a better-than-expected rise in third-quarter profit, helped by strong growth in its wireless venture Cingular and merger-related cost savings.

The biggest U.S. telecoms carrier, formed through SBC Communications Inc.’s acquisition of AT&T Corp. last November, said profit, excluding merger-related costs and other special items, rose 58.2 percent from a year earlier to $2.4 billion, or 63 cents per share.

That topped the average forecast of 58 cents per share from analysts polled by Reuters Estimates.

Despite the higher-than-expected results, AT&T’s shares rose only modestly on the New York Stock Exchange as investors had already pushed up the stock by 2 percent last Friday, when Cingular reported strong results.

AT&T also said cost savings helped profit growth, and the company had cut 3,600 jobs in the third quarter, reaching a head count reduction of 10,500 so far this year.

While that vindicated the company’s merger strategy, some analysts said it also suggested that AT&T’s core business was not growing as strongly as the bottom line suggested.

“The numbers were slightly better than expected. Certainly the Cingular numbers were good. But cost-cutting was a major factor,” said Surterre Research analyst Todd Rethemeier, who has a “hold” rating on the stock.

The company said primary consumer lines fell by 242,000 in the third quarter, and analysts said consumers were continuing to shift to wireless phones and all-in-one packages of voice, video and Internet offered by cable television providers.

“Looking at the line losses, it seems there is some competitive impact from cable companies,” Rethemeier said.

WIRELESS GROWTH

AT&T is preparing to merge with BellSouth Corp. (NYSE:BLS – news), a move that would consolidate its ownership of Cingular and reinforce its position as the biggest U.S. telecoms service provider. The U.S. Federal Communications Commission has scheduled a November 3 meeting to vote on the merger.

“Wireless delivered impressive margin expansion along with strong subscriber and revenue growth,” said AT&T Chairman and Chief Executive Edward Whitacre.

Analysts also expect Verizon Communications Inc. (NYSE:VZ – news) to post strong quarterly results since its wireless venture, along with Cingular, appears to be taking market share from Sprint Nextel Corp. (NYSE:S – news).

AT&T’s consolidated revenue, which does not include sales from its 60 percent stake in Cingular, totaled $15.6 billion for the quarter ended September 30, up from a pre-merger $10.3 billion in the third quarter of 2005.

Net income was $2.2 billion, up 73.8 percent from the year-ago quarter, or 56 cents per share. That included costs from SBC Communications’ acquisition of AT&T Corp. and from Cingular Wireless’ purchase of AT&T Wireless.

The company said Internet subscriptions also helped to bolster sales. High-speed Internet subscribers increased 25.5 percent from a year earlier to 8.2 million.

AT&T is also aiming to compete with cable companies by expanding its high-definition video service in a plan called Project Lightspeed. The Internet-based video service will be expanded to around 15 cities by the end of the year. It had previously targeted 15 to 20 cities by the end of 2006.

The $5 billion investment, while smaller than a similar project by Verizon, has raised concerns about costs.

“We continue to have concerns about a looming capital expenditure increase commitment to the business, if Project Lightspeed proves incapable of providing a competitive consumer video offering on a wide scale across AT&T’s footprint,” said Stifel Nicolaus analyst Christopher King, who recommends selling AT&T stock.

AT&T shares fell briefly in early trading before recovering to rise 29 cents, or 0.87 percent, to $34.73 on the New York Stock Exchange late Monday afternoon. The shares have risen around 40 percent so far this year.