AT&T; 3rd-Quarter Profit Increases 68%

AT&T; Corp., the nation’s No. 1 long-distance company, posted a better-than-expected 68% increase in third-quarter profit Monday as cost cuts and revenue growth in its business and wireless units offset a decline in its consumer division.

AT&T; said its profit from continuing operations rose to $1.81 billion, or $1 a share, from $1.08 billion, or 60 cents, a year earlier. That beat the average estimate of 95 cents from analysts polled by First Call Corp. Revenue rose 4.3% to $13.65 billion.

Chief Executive C. Michael Armstrong has reversed profit declines since taking over a year ago, by shedding 18,000 jobs and accelerating sales growth. He expanded AT&T;’s wireless and Internet businesses and pushed into the $100-billion local phone market. That has spurred sales growth, led by a 19% rise in wireless services. Second-quarter sales grew just 1%.

Analysts said investors remained cautious, however, because AT&T; is only partly through its massive restructuring and must still absorb its recent acquisition of Teleport, a local phone company serving businesses, and its pending $48-billion acquisition of cable television giant Tele-Communications Inc. AT&T; expects the TCI deal to close in the first half of 1999.

Armstrong told analysts he was pleased with the results, but he added: “There’s no question in my mind or any minds of the leadership we still have further to go.”

Business service revenue increased 4.7% in the quarter, driven by strong double-digit growth in high-speed data services.

Revenue from consumer services fell 2.9% because of pressure from rivals’ promotional calling plans and the shift toward wireless services instead of more high-priced long-distance services such as calling-card calls.

AT&T; said, however, that it’s making more money per caller because of a get-tough strategy with customers that includes charging a minimum of $3 a month even if they don’t make any calls.

AT&T;’s wireless business was a bright spot in the quarter because of the company’s aggressive new Digital One Rate pricing plan. Total net wireless subscribers increased by 325,000, or nearly 74%, while wireless revenue increased 19% to $1.4 billion. AT&T;’s WorldNet Internet service and other online service revenue increased 65.1% to $100 million.

AT&T; cut its operating expenses 8.8% in the quarter. Selling, general and administrative expenses were 24.4% of revenue, down from 29.8% a year ago.

AT&T; said it was on track for full-year 1998 operational earnings to be in the range of $3.40 to $3.45 a share, with revenue growth to be between 2% and 4%. Revenue growth in 1999 is expected to accelerate to about 6%.

At a Glance

Other earnings, excluding one-time gains and charges unless noted:

* Alaska Air Group Inc.’s third-quarter profit rose 32% to $55.5 million, or $2.10 a share, on higher passenger traffic and lower fuel costs. Analysts were expecting $2.11 a share. The holding company for Alaska Airlines and Horizon Air said operating revenue rose 7.6% to $539 million.

* Wholesale drug distributor Cardinal Health Inc. said its fiscal first-quarter profit rose 21% to $85.6 million, or 63 cents a share, beating the average forecast of 61 cents as revenue jumped 25% to $4.63 billion.

* Centex Corp., the U.S.’ second-largest home builder, said fiscal second-quarter earnings rose 55% to $56.6 million, or 91 cents a diluted share, far exceeding estimates of 80 cents, as it continued to benefit from a strong housing market and low interest rates. Revenue rose 25% to $1.2 billion.

* Chemicals maker Union Carbide Corp. said its third-quarter earnings fell 64% to $65 million, or 47 cents a share, missing estimates of 53 cents, on declining prices and reduced demand from Asia. Revenue fell 19% to $1.35 billion. The company also warned that higher costs for some materials will hurt fourth-quarter results.

MORE EARNINGS: C2, C4