In spite of wireless subscriber gains that surpassed the estimates by the analysts, AT&T's profit in the fourth quarter dropped from the previous year's $3.1 billion, or 51 cents a share, to $2.4 billion, or 41 cents a share.

Without the inclusion of items like costs related to merger expenses and job cuts, the earnings of the company fell to 64 cents per share from 71 cents per share.

AT&T with exclusive rights to vend the iPhone in the US - the newest model launched in July - announced a 4 percent cut in jobs, vowing to cut-down expenses as consumer spending declined.

One of the biggest phone companies, AT&T's dependence on wireless subscribers has increased vis-a-vis its conventional wireline customers. The company's payment of high subsidies for shoring up Apple's iPhone resulted in the severing of connections by the traditional users.

While 2.1 million net new subscribers were added by AT&T during the quarter, 1.9 million iPhone 3Gs were set in motion by the company, with nearly 40 percent of that clientele new to the carrier.

Boosted by the new iPhone, services like video downloads and Web surfing contributed greatly to AT&T's revenue increase of 51 percent.

In fact, Randall Stephenson, AT&T CEO, is planning a shift in the company's resources from the home-phone business to rapidly-growing units like mobile service, in order to sustain profitability.