AT&T; Sees Quarterly Revenue Drop 24%

AT&T; Corp. said Monday that first-quarter profit dropped 24% and warned that second-quarter earnings will fall further, as it spends more to enter new markets and fight rivals in its long-distance and wireless businesses.

Profit from continuing operations fell to $1.12 billion, or 69 cents a share, from $1.47 billion, or 92 cents, in the year-earlier period. That is a penny short of the average estimate of Wall Street analysts.

The lower-than-expected results show that AT&T;’s split into three companies has yet to be the promised boon to shareholders. Shares are down 20% since Dec. 31, when AT&T; completed the spinoff of its computer and equipment businesses, leaving it a long-distance and wireless provider.

On Monday, its stock fell 62.5 cents to close at $33 on the New York Stock Exchange.

“The split has clearly exposed where AT&T; is most vulnerable,” said Brian Adamik, an analyst at the Yankee Group.

However, its first-quarter results included details of changes in how it reaches out and touches potential customers.

In a push to dissuade people from abusing its generosity, the phone giant is writing fewer checks to first-time customers.

Instead, it is giving away 250 free minutes of calls a month for six months.

The new promotion is not necessarily cheaper. But AT&T; wants to cut down on consumers who sign up to get the free money and then promptly switch to a rival carrier.

Meanwhile, the company said it will offer 4,000 managers, or 73% of those in its consumer long-distance business, a voluntary buyout plan Wednesday, the latest step in its efforts to slash 17,000 jobs by 1999.

AT&T;’s sales rose just 1.5%--the slowest pace in at least two years--to $13.05 billion from $12.85 billion.

AT&T; didn’t break out sales for its long-distance and wireless businesses before 1995.

By comparison, Sprint Corp., the No. 3 U.S. long-distance phone company, had a 7.3% jump in first-quarter sales.

Sales in AT&T;’s consumer long-distance business fell 1% to $6.06 billion, while calling volume, or the minutes of use on AT&T;’s network, was unchanged from a year earlier.

Those results underscore how difficult a turnaround will be for John Walter, who completed his first full quarter as president, and Gail McGovern, the new head of the consumer phone business. AT&T; is fighting Sprint, MCI Communications Corp. and smaller rivals that have made inroads in the residential market.

AT&T; reiterated its goal of earning $3.45 a share to $3.75 a share from its main long-distance and wireless operations this year.

In addition, it said dilution from new businesses is expected to reduce earnings on the “high end” of 75 cents a share to $1 a share.

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