AT&T today reported net revenue of $3.1 billion for Q1 2009 down from 3.5 billion it posted for the same quarter last year. The decline in profit was largely due to drop in traditional phone service revenue. However, AT&T’s wireless phone service saw double-digit growth in revenue as the company added 1.2 million new cellphone subscribers.

AT&T said that 1.6 million new iPhone customers propelled the growth in wireless business. More than 40 percent of the customers who activated iPhone were new to AT&T. This means that more than half of new subscribers (0.64 million) added to AT&T service came because of the iPhone. AT&T’s CEO Randall Stephenson said, “I am particularly pleased with the success of our iPhone 3G initiative, which has driven strong high-end customer growth and delivered financial benefits ahead of our original outlook.”

AT&T has more than doubled the number of smartphones on the network in past year and also increased data revenue by more than 40 percent over previous quarter. According to AT&T, iPhone owners tend to spend an average of about 1.6 times more per month than other subscribers and are less likely to defect, as device satisfaction is higher in iPhone customers.

Total number of cellular subscribers has reached 78.2 million on AT&T making it the second biggest network in US.