Baby Bells SBC and Ameritech Beat Expectations

Baby Bells SBC Communications Inc. and Ameritech Corp. on Thursday reported better-than-expected earnings for the second quarter amid strong demand for data services and more phone lines for Internet hookups.

SBC, which agreed to buy Ameritech for $66 billion in May, said its profit rose 20% to $966 million, or 52 cents a diluted share, from $808 million, or 44 cents, a year ago. Cost-cutting, along with gains in phone customers and services, helped boost results at the San Antonio-based company.

SBC, the second-largest U.S. phone company, was expected to earn 50 cents, the average estimate of analysts polled by First Call Corp. Revenue rose 7.9% to $6.59 billion.

Chicago-based Ameritech, the fifth-largest Baby Bell, said earnings rose 11% to $695 million, or 63 cents a diluted share, from $624 million, or 57 cents, a year ago. That beat the average 62-cent estimate of analysts polled by First Call. Sales jumped 7.6% to $4.29 billion.

“The local phone companies are enjoying ideal operating conditions,” said Simon Flannery, an analyst at J.P. Morgan Securities Inc. SBC installed 276,000 phone lines in the second quarter, bringing its total to 34.2 million. It also increased wireless customers by 226,000. Ameritech added 136,000 lines, boosting its total 4.1% to 20.8 million, and added 606,000 wireless customers.

On the New York Stock Exchange, SBC shares rose $1.13 to $40.75, while Ameritech shares rose $2 to $49.75.