US number two operator AT&T said that Q2 saw its highest contract subscriber gains for five years, although it lost some prepaid customers and falling ARPU took its toll on mobile service revenue.

For its Wireless unit, segment income was $4.3 billion, down 7.7 per cent, on operating revenue of $17.93 billion, up 3.7 per cent.

Service revenue was $15.15 billion, down 1.4 per cent. Equipment revenue was $2.78 billion, up 44.8 per cent.

The company noted shifts in its Wireless revenue mix as it transitions to separate subscription and equipment instalment plans, from the previous device subsidy model.

It ended the period with 116.6 million subscribers, up 0.63 million during the three months. Its contract customer base was 74.33 million, up 1 million during the quarter.

But the company lost 0.41 million prepaid customers, and 0.16 million subscribers connected via resellers, although the latter was more than offset by 0.18 million “connected device” additions.

With regard to the prepaid subscriber loss, AT&T said that this included an expected reduction in Cricket subscribers, as it begins its integration of Leap Wireless. The reseller disconnections were described as “low-revenue 2G subscriber accounts”.

Wireless service ARPU was $43.41, down from $47.67 in the prior-year period.

Randall Stephenson (pictured), chairman and CEO of AT&T, said: “Our move to simple pricing and no-device-subsidy plans is repositioning the wireless business model, resulting in our best postpaid net adds in nearly five years and our lowest-ever postpaid churn.”

The company added 1.6 million postpaid smartphones in the quarter, and at the end of the period 80 per cent (54.6 million) of its contract customer base had such devices (up from 73 per cent a year earlier).

ARPU for smartphone subscribers is more than twice that of non-smartphone subscribers, AT&T said.

As part of its Project VIP-related deployment, the company now has more than 290 million population coverage by 4G LTE. Its 4G deployment is “expected to be substantially complete this summer.”

On a group level, including its fixed and business units, the company reported a net income attributable to AT&T of $3.55 billion, down 7.2 per cent, on operating revenue of $32.58 billion, up 1.6 per cent.

Operating income was $5.62 billion, down 8.1 per cent.