AT&T Corp. (T) painted a positive picture Friday with what may be its final earnings report before becoming part of SBC Communications Inc. (SBC), topping Wall Street forecasts with third-quarter income of $520 million and boosting its revenue forecast for the second time this year.

The iconic telephone company, which in January agreed to be acquired by SBC for $16 billion, also expressed optimism the deal would close before year's end, winning regulatory approval without concessions such as asset sales or price freezes.

Despite the upbeat report, AT&T's results reflected the persistent competitive turmoil of the telecommunications industry, which has reduced the once mighty company's customer base by two thirds over the past decade — from roughly 60 million at the peak to less than 20 million at the end of the latest quarter.

"AT&T's employees across all areas of the company have done a fantastic job of transforming our business in the face of adverse and chaotic conditions in our sector," Chief Financial Officer Thomas Horton said during a conference call with industry analysts.

The profit reported Friday amounted to 64 cents per share for the three months ended Sept. 30. The results included a $92 million expense relating to investments in aircraft leases with airlines that have filed for bankruptcy, as well as $20 million in expenses for the SBC deal and a $41 million pretax benefit.

In the third quarter of 2004, AT&T lost $7.15 billion, or $8.99 per share, as the company wrote down the book value of its national telecommunications network by $11.4 billion following a decision to retreat from the consumer telephone business. Excluding that expense, other restructuring charges and one-time tax benefits, it would have earned $262 million, or 33 cents a share, a year ago.

The latest results appeared to top Wall Street forecasts by a sizable margin, though Thomson Financial said the assortment of one-time charges and credits made it unclear whether the 51 cent profit forecast from its analyst survey was directly comparable to the figures emphasized in AT&T's report.

Shares of AT&T rose 47 cents, or 2.5 percent, to $19.05 in afternoon trading on the New York Stock Exchange.

Third-quarter revenue fell 13.3 percent to $6.62 billion from $7.64 billion in the year-ago period, as the long-distance calling and data businesses continued to shrink, AT&T said. Business services accounted for $5.1 billion of the revenue total, and consumer services generated $1.5 billion.

While competitive pressures continue to squeeze the business, the company said its overall revenue decline for 2005 might be smaller than previously expected.

AT&T said it now expects full-year revenue to total at least $26.5 billion, about a half billion dollars above the upward revision issued by the company after the second quarter. The company also boosted its estimate for operating profit margin, predicting a percentage "in the low teens, outpacing prior expectations."

SBC and AT&T originally said their deal would close in the first half of 2006, but now say it could close before January.

They have secured government approval for the deal from all but a few key states, and are still waiting to see whether regulators at the Justice Department (search) and Federal Communications Commission (search) will seek any conditions before allowing it to proceed.

"We don't think there's any need for divestitures. It is conceivable there will be some conditions on the merger, but we certainly don't see any need for them," Horton said in an interview. "Regulators are going through a rigorous evaluation of the merger and we're confident that at end of the regulatory process that this merger will not harm competition and will be good for customers."

Though AT&T as a company is slated to be absorbed into SBC, the AT&T monicker may live on as the combined company's name or the brand for its products.

Recent news reports have indicated that SBC, whose name was originally Southwestern Bell Corp. and remains a largely regional brand, is seriously considering a switch to the AT&T name. San Antonio-based SBC has declined comment.

For the first nine months of 2005, AT&T's profit totaled $1.36 billion, or $1.68 per share, on revenues of $20.40 billion. That compares with a net loss of $6.74 billion, or $8.48 per share, on revenues of $23.26 billion.