AT&T Inc reported a higher quarterly profit, driven by a rise in wireless margins, as it had to shell out less in subsidies to Apple Inc because it sold fewer iPhones in the quarter.

Its shares rose almost 2 percent after the news.

AT&T and its rivals had been weighed down by iPhone costs in fourth quarter, when the latest iPhone was launched. While fewer iPhone sales meant weaker subscriber growth for AT&T, it did help the company's wireless service profitability.

In the first quarter AT&T's wireless margin rose to 41.6 percent based on earnings before interest, tax, depreciation and amortizing, from 28.7 percent in the fourth quarter and 39 percent in the year-ago quarter.

Its net income rose to $3.58 billion, or 60 cents per share, from $3.4 billion, or 57 cents per share in the year-ago quarter. Consolidated revenue rose nearly 2 percent to $31.8 billion from $31.25 billion.

The No. 2 U.S. mobile provider added 187,000 subscribers in the quarter, compared with expectations for 193,000 from six analysts surveyed by Reuters. This was much fewer than its bigger rival, Verizon Wireless, which reported 501,000 net additions last week.

AT&T shares rose to $31.15 in premarket trade after closing at $30.61 on Monday on the New York Stock Exchange.

(Reporting by Sinead Carew in New York and Sayantani Ghosh in Bangalore; Editing by Ted Kerr, Dave Zimmerman; sayantani.ghosh@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: sayantani.ghosh.reuters.com@reuters.net)

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