EARNINGS : Telephone Firms Ring Up Mixed Profits in Quarter

Times Staff Writer

Fueled by continued strong growth in its long-distance telephone business, AT&T;'s profits rose 17.7% in the second quarter, the company reported Thursday.

Earnings results were mixed, however, among the trio of so-called Baby Bell local phone companies that also reported financial results. San Francisco-based Pacific Telesis, parent of Pacific Bell, said its profits rose a scant 1.2% mainly because of vigorous growth in its cellular phone business. Meanwhile, Southwestern Bell in St. Louis said its earnings rose 22.8% while profits dropped 13.6% at Nynex in White Plains, N.Y.


For American Telephone & Telegraph, which had written off old equipment and taken a $1.67-billion loss last year, the news was all good. “By and large they were excellent results,” said Charles Nichols, an analyst with Bear, Stearns & Co. “They’re making progress on the revenue side at the same time they’re improving (profit) margins.”


For the quarter ended June 30, net income was $699 million despite a $96-million charge due to depreciation changes and the declining value of old telecommunications gear. Revenue increased 5.2% to $9.26 billion, with long-distance revenue growing 7%.

Chairman Robert E. Allen attributed the showing to AT&T;'s having made “definite progress toward our objective of achieving business growth in tandem with expense control.”

Allen credited, among other things, the company’s expanded sales force. Last year, 2,000 staff employees were shifted to sales, and another 3,000 workers will still be redeployed.

AT&T; said product sales increased 4%, largely due to improved sales of telecommunications abroad, including a first-ever, $154-million contract to provide optical communications gear to Japan’s Nippon Telegraph & Telephone.


“It’s a good fundamental quarter,” said Gregory Sawers of Sanford C. Bernstein & Co. “I read it that they’re stabilizing market share. They’re still growing less than the industry level, but they’re improving.”

AT&T;'s biggest rivals in the long-distance business--MCI Communications and U S Sprint--earlier this week reported that their results improved sharply.

Pacific Telesis

For Pacific Telesis, net quarterly income rose 1.2% to $325 million on revenue of $2.41 billion, up 1.7%. Chief Executive Sam Ginn attributed Pacific Telesis’ modest gain to “the improving performance of our cellular business,” where sales increased by 51.3% to $111.5 million and profits more than tripled to $13.5 million.


Results were flat, however, in the company’s local phone business in California and Nevada.

In the stock market Thursday, AT&T; shares closed at $57.25, up 25 cents; Pacific Telesis finished at $43, off 87.5 cents; Southwestern Bell dropped $1.125 to $53.625, and Nynex fell $1.375 to $78.25.