AT&T today said it is reaping the benefits of the AT&T-SBC merger even faster than expected, posting an 81% increase in earnings per share, surpassing analysts’ expectations.

The company posted a net income of $1.81 billion or 46 cents per share, up from $1 billion or 30 cents per share, on sales of $15.8 billion, excluding Cingular results. Those earnings came after 12 cents per share in merger-related costs for both Cingular and AT&T-SBC. Adjusted EPS was 58 cents up 35% from a year ago.

CFO Rick Lindner told analysts this morning the profit improvement was “driven by the merger integration and our operational initiatives,” adding that the savings from the merger would hit $900 million this year, or $200 million more than expected. The integration is running ahead of schedule, he said. AT&T started migrating traffic on-net in June and expects to complete that process by the end of the year. In addition, the company has already trimmed 3600 jobs from the 7000 it expects to cut this year.

“If I were to sum up the quarter in a few words, I’d simply say we are delivering on our targets,” he said. “The AT&T merger is working. We are delivering on our plan.”

Wireline revenues are up, he added, and--like Bellsouth a day earlier--AT&T is seeing a stabilization in business revenues. Both companies benefited from Cingular’s continued growth, announced last week.

Lindner stressed AT&T’s improved operating margins, saying the full-year adjusted operating income margin is expected to be 17% to 18%, up from 15% to 16% projected earlier. Through merger synergies and operating efficiencies, he said, AT&T has lowered its operating expenses by $263 million, excluding merger costs.

Data revenues and small business sales helped bolster the wireline business. Data revenues were up and in-region small to mid-sized business revenue grew 4.9%. Enterprise data revenues were up, through overall business revenues were off slightly from $4.43 billion to $4.42 billion.

To date, AT&T has not been aggressively buying back shares, because of pending merger-related shareholder votes, the company indicated. It now plans to buy back $2 billion to $3 billion of shares this year, as part of its overall $10 billion share buyback.