AT&T; Posts First-Ever Annual Loss, Blames Modernization Costs

American Telephone & Telegraph Co. today reported the first annual loss in its 104-year history, reflecting a previously announced charge for modernization that reduced net income by $3.96 billion.

The results, which AT&T; had projected last month, resulted from a $6.72-billion pretax charge in the fourth quarter that covers the cost of scrapping outdated equipment and moving, retiring or laying off 16,000 employees.

AT&T;’s stock was rock solid after the announcement, unchanged at $30.87 1/2 at mid-morning in consolidated New York Stock Exchange trading.

“You say, ‘My gosh, what a huge charge.’ But when it’s AT&T; and it’s such a large company, people just brush it off and look ahead to the next quarter. Most companies, it would just wipe them right out,” said Audrey Stevoff, an analyst at Duff & Phelps Inc. in Chicago.

AT&T; has previously said the charge will have no effect on its cash flow, its ability to pay dividends or the money available for investment. Revenue in the fourth quarter and the full year set records for the period since the 1984 breakup of the Bell System.

AT&T; said it had a net loss of $3.34 billion for the three months ended Dec. 31, compared with profits of $498 million, or 46 cents a share, a year earlier. Revenue rose to $9.21 billion from $8.65 billion a year earlier.

For all of 1988, AT&T; said it lost $1.67 billion compared to a profit of $2.04 billion, or $1.88 a share, a year earlier. Revenue rose to $35.2 billion from $33.8 billion.

Nynex Corp., one of the companies spun off from AT&T; in the 1984 breakup, separately reported a 6.1% rise in its fourth-quarter profit.

The charge that resulted in AT&T;’s historic annual loss came from speeding up its program of getting rid of old phone equipment and putting in new digital switches and other equipment that uses the language of computers.

AT&T; said the changes will put the company in a better position to lower long-distance prices and meet the competition.