AT&T, one of the largest telecom operators in the United States, reported second-quarter results on Wednesday that exceeded Wall Street's expectations for wireless subscriber additions, driven by strong demand for its higher-tier unlimited plans. This news sent the company's shares up by 4% in premarket trading.

The telecom giant added 419,000 postpaid wireless phone subscribers in the quarter, surpassing the 284,800 additions anticipated by analysts polled by FactSet. AT&T's ability to attract budget-conscious customers with its competitively priced unlimited plans played a crucial role in this achievement. Despite intense competition from T-Mobile and Verizon, AT&T's lower churn rate of 0.70% for postpaid phones indicates strong customer retention.

While the increase in wireless subscribers provided a significant boost, slower phone upgrades in the U.S. posed a challenge, reflecting a trend seen by Verizon as well. AT&T's mobility equipment revenue fell by 8% during the April to June period. Consequently, the company's total revenue for the quarter was $29.8 billion, slightly below the $29.92 billion expected by analysts.

Despite these mixed results, AT&T's free cash flow, a key metric for determining dividend payouts, rose by more than 9% to $4.6 billion, surpassing LSEG's estimate of $4.22 billion. This increase in free cash flow underscores the company's strong financial health and its ability to reward shareholders through dividends and stock buybacks.

AT&T also faced significant operational challenges during the quarter. The company was troubled by data breaches and lengthy outages. Notably, a nationwide outage in February, lasting over 12 hours, blocked more than 92 million voice calls and prevented over 25,000 attempts to reach 911. The U.S. Federal Communications Commission reported these issues and indicated potential fines for the telecom giant.

In the Mobility segment, AT&T reported 997,000 wireless net additions, including the 419,000 postpaid phone net additions, which outpaced the 279,000 anticipated by analysts. Verizon, in comparison, added 148,000 postpaid phone net subscribers, exceeding the forecast of 118,000. AT&T's postpaid churn rate of 0.85%, down from 0.95% a year ago, further highlights its competitive edge in retaining customers.

The Consumer Wireline segment showed mixed results, with 239,000 AT&T Fiber net additions, falling short of the 253,000 estimated by analysts. In contrast, Verizon reported 391,000 total broadband net additions. Additionally, AT&T's Internet Air service saw 139,000 net additions.

AT&T's adjusted EBITDA rose to $11.3 billion from $11.1 billion a year ago, reflecting operational efficiency. The company spent $4.4 billion on capital expenditures during the quarter. Operating cash flow stood at $9.1 billion, down from $9.9 billion in the same period last year, while free cash flow increased to $4.6 billion from $4.2 billion.

The company maintained its fiscal year 2024 outlook, projecting wireless service revenue growth in the 3% range, broadband revenue growth of over 7%, and adjusted EPS between $2.15 and $2.25, in line with the consensus estimate of $2.22. AT&T also reaffirmed its full-year adjusted EBITDA growth target of 3% and a free cash flow range of $17 billion to $18 billion.