AT&T Inc, the No. 2 U.S. wireless carrier, reported a smaller-than-expected increase in quarterly revenue as it earned less from each postpaid customer for its wireless services amid growing competition from rivals.

The company said on Tuesday that average revenue per postpaid user fell 2 percent in the fourth quarter ended Dec. 31.

AT&T said it added a net 526,000 postpaid and 469,000 prepaid customers in the quarter.

Analysts had expected net additions of 485,000 postpaid and 354,000 prepaid connections, according to FactSet StreetAccount.

AT&T's shares were down more than 1 percent in extended trading.

An oversaturated U.S. wireless market has led to fierce competition between market leader Verizon Communications Inc, AT&T and smaller rivals Sprint Corp and T-Mobile US Inc, which have stepped up promotions to entice customers.

AT&T has been seeking new revenue streams and is betting on the acquisition of the DirecTV satellite TV business to help beef up its bundles of cellular, broadband, TV and fixed-line phone services.

The company's total operating revenue rose 22.3 percent to $42.12 billion, slightly missing analysts average estimate of $42.75 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to AT&T was $4.01 billion, or 65 cents per share, compared with a loss of about $4 billion, or 77 cents per share.

The company is reporting quarterly earnings for the second time since completing its $48 billion acquisition of DirecTV, which made it the world's biggest pay-TV operator.

(Reporting by Abhirup Roy in Bengaluru; Editing by Savio D'Souza)