It seems the halo effect of the iPhone is spreading way beyond Apple. After Apple announced record profits earlier this week, its network partner in the iPhone has now announced a 26 percent year on year improvement in profits as well, attributed mostly to the 3.2 million new iPhone 4 connections that it activated.

On Thursday, the carrier reported earnings of $4 billion compared with $3.2 billion in the prior year’s quarter. Sales inched up 0.6 percent to $30.8 billion from a year ago.

The company attributed the surge in earnings to the 3.2 million iPhone activations during the quarter, with around 27 percent of those from customers new to AT&T. Preorders of Apple’s iPhone 4 were 10 times higher the first day than those for the iPhone 3GS a year earlier, AT&T added.

The carrier also saw fewer people exiting its service, with its churn rate shrinking to a record low of 1.29 percent from 1.48 percent a year ago. Overall, it added 1.6 million wireless subscribers during the quarter to reach a total of 90.1 million customers, a 13 percent gain over a year ago.

[via Cnet]