By John Kell 

AT&T Inc. said its first-quarter revenue rose 3.6%, helped by a sharp increase in wireless subscribers, while the telecommunication giant's earnings edged down slightly thanks to higher operating and income tax expenses.

The company raised its revenue outlook for the year, now projecting growth of 4% or more, versus its previous call for a 2% to 3% increase. It affirmed its earnings guidance for the year.

AT&T said it added 625,000 customers who signed long-term service contracts, which it deemed a record for the first quarter, compared with 296,000 additions a year earlier and 566,000 in the fourth quarter.

AT&T and Verizon Wireless, the two biggest U.S. wireless carriers, are facing renewed pressure from rivals T-Mobile US Inc. and Sprint Corp. T-Mobile has been especially vocal, doing away with standbys like service contracts and international data fees in an effort to win new customers. AT&T has also expanded its planned rollout of high-speed Internet service to as many as 100 cities and towns, amid tougher competition as rivals in the cable industry bulk up.

For the latest period, AT&T reported a profit of $3.65 billion, down from $3.7 billion a year earlier. On a per-share basis, the profit rose to 70 cents from 67 cents as the latest period had fewer shares outstanding. The adjusted profit, which excludes Leap transaction-related costs and an asset sale a year ago, climbed to 71 cents from 64 cents a share.

Revenue grew 3.6% to $32.5 billion.

Analysts surveyed by Thomson Reuters had expected an adjusted profit of 70 cents a share on $32.47 billion in revenue.

AT&T said the rate at which wireless contract customers left its network, called churn, increased to 1.07% from 1.04%. The figure totaled 1.11% in the fourth quarter.

Total wireless revenue, including equipment sales, grew 7%, while total wireline revenue was down 0.4%.

Operating expenses rose 3.1%, while income tax expenses jumped 23%.

AT&T, which closed on its acquisition of Leap Wireless in March, said it incurred some transaction-related costs during the quarter. The company said it expects to incur about $1.2 billion of integration costs over the next two years and warned it sees five cents of dilution to profit in 2014.

Leap's results since the close of the deal had a "minimal" impact on AT&T's first-quarter earnings, the company said.

Write to John Kell at john.kell@wsj.com

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