American Telephone & Telegraph reported a 16.2% surge Thursday in third-quarter earnings, reflecting the benefits of a hiring freeze and other cost cutting along with healthy growth in the sale of telephone systems to big business customers.
Meanwhile, four of AT&T;'s former subsidiaries--Pacific Telesis, U S West, Bell Atlantic and Nynex--reported smaller earnings increases that, like AT&T;'s profits, were in line with earlier estimates by industry analysts. San Francisco-based Pacific Telesis, the parent of Pacific Bell and Nevada Bell telephone companies, reported third-quarter earnings of $318 million, up 5.3%, on a 2% rise in revenue to $2.38 billion.
For AT&T;, the earnings of $587 million came on a revenue increase of just 3.2% to $8.75 billion.
“This quarter’s improvement reflects double-digit growth in product sales and an increase in long-distance revenues,” said AT&T; Chairman Robert E. Allen. Sales of computer products were flat.
Analysts welcomed an announcement by Allen that the company would speed modernization of its long-distance network, completing the work in 1990 instead of 1993. While the network is the nation’s most extensive, it is also the oldest.
The accelerated modernization program may lead to a fourth-quarter writedown of some of AT&T;'s older equipment. Spokeswoman LuAnn Gardner said the company does not know what the impact will be on earnings.
Maria Lewis, an analyst with Shearson Lehman Hutton, said the move was necessary because AT&T; is losing market share to its chief competitor, MCI Communications.
AT&T;'s stock closed at $27.50 a share in composite trading Thursday on the New York Stock Exchange, up 62.50 cents.
At Pacific Telesis, Chairman and Chief Executive Sam Ginn said the PacTel units, which were established over the last five years, have begun contributing to earnings.