AT&T Inc. (NYSE: T) announced a 22% increase in first quarter net income due to strong growth in wireless operations.

The country's largest telecommunications company had net income of $3.46 billion up from $2.85 billion last year. The highlight was earnings of nearly $3 billion by AT&T's wireless unit - double the unit's profit first quarter last year - on an 18% increase in revenue. Strong subscriber growth and increased revenue per subscriber, due to more expensive plans that feature Apple Inc.'s (NDAQ: AAPL) iPhone for instance, are driving AT&T's wireless resurgence.

The wireless unit added 1.3 million new subscribers to reach over 71 million total subscribers as of the end of March, all while increasing average revenue per user by 2% to over $50. Nearly half of this increase in subscribers were prepaid customers that are generally not as desirable because they use less expensive plans and are prone to switch carriers more often.

This wireless strength is needed to balance the continued decline of the company's landline business. The so-called "wireline" business unit posted a 2% drop in earnings and revenue. In a sign of the shifting business environment, the company recently announced plans to lay off 4,600 employees in an attempt to streamline its wireline business - approximately the same number of employees the company plans to hire back for its other units.

The real question moving forward is whether AT%T wireless, in a cutthroat sector, can continue to buttress the wireline business as it fades to obsolescence.

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