AT&T Wireless Services Inc. (AWE) on Wednesday posted a modest quarterly profit, marking a slight rebound after two straight quarterly losses when mobile phone customers fled amid technical problems.

AT&T Wireless added 15,000 new subscribers in the quarter, but said stemming customer defections would continue to be tough in the run-up to its takeover by Cingular Wireless (search) this year.

"Churn this year will continue to be a challenge," AT&T Wireless' president of mobility services, Michael Keith, told analysts on a conference call. Churn reflects the percentage of customers canceling service.

Second-quarter profit fell to $61 million, or 2 cents per share, from $222 million, or 8 cents a share, a year earlier.

Service revenue fell 1.7 percent to $3.87 billion from $3.94 billion a year ago. Revenue, including mobile phone sales, rose 2.3 percent to $4.22 billion from $4.16 billion.

On average, analysts were expecting the company to break even and post revenue of $4.2 billion, according to Reuters Estimates.

One analyst said he had hoped AT&T Wireless would report a stronger rebound from the previous quarters losses.

"The only silver lining in the quarter is that churn declined sequentially. Things are improving but only slightly," said Kevin Roe of Roe Equity Research.

Redmond, Washington-based AT&T Wireless churn fell to 3.4 percent in the second quarter from 3.7 percent in the first quarter this year But it remained high compared with 2.2 percent a year earlier.

AT&T Wireless customers fled in the 2003 fourth quarter and 2004 first quarter as customer service and technical problems coincided with new rules that let customers keep their phone number while switching to another wireless service provider.

Shares of AT&T Wireless rose 7 cents to $14.46, after earlier trading as high as $14.47, the highest price in 3-1/2 years

AT&T Wireless is to be bought by Cingular for $15 a share, in a deal valued at a total of $41 billion.

Average monthly revenue per customer, a key financial measure for wireless companies, was $58.80, down from $60.60 a year earlier. That was slightly higher than $56.60 in the first quarter.

AT&T Wireless, currently the third biggest U.S. mobile phone company said it still expects the Cingular deal to close by year-end.

AT&T Wireless said it has responded to information requests from the U.S. Department of Justice (search) and telecommunications regulator Federal Communications Commission (search) related to the deal.

The combined company will operate under the Cingular brand.