AT&T;’s Push Into New Markets Pays Off as Profit Leaps 42%
AT&T; Corp. said Tuesday that its first-quarter profit rose a better-than-expected 42% as sales climbed at the fastest rate in three years, an early sign of success for Chairman C. Michael Armstrong’s push into new markets and businesses.
The No. 1 U.S. phone company said profit from operations rose to $1.78 billion, or 67 cents a share, from $1.25 billion, or 46 cents, a year ago. That beat the 63-cent average forecast from analysts surveyed by First Call Corp. The results exclude Tele-Communications Inc., the No. 2 U.S. cable TV company, which AT&T; bought last month for $59.4 billion.
Armstrong boosted sales 6.1% to $13.61 billion by focusing on wireless, Internet, data and international services, the fastest-growing areas in the communications market. Now he’s adding cable TV companies, with TCI and a $62.5-billion offer for MediaOne Group Inc. made earlier this week, to deliver more services and add customers AT&T; doesn’t reach in its phone business.
Total sales, including TCI, grew 9.9% to $14.1 billion in the quarter.
“Armstrong’s done everything he said he would,” said Michael Funsch, an analyst at Independence Investment Associates, which owns about 8.84 million AT&T; shares. “They’ve executed very well so far.”
AT&T; also said it is forming a partnership with Nippon Telegraph & Telephone Corp., Japan’s dominant phone company, to sell data services to large corporations. The pact comes just days after AT&T; said it would join British Telecommunications in buying a combined 30% stake in Japan Telecom Co., a long-distance and international carrier.
AT&T;’s sales to business customers rose 7.5% to $6.21 billion in the latest quarter, while residential revenue fell 3.4% to $5.49 billion. Sales from cellular phone service increased 40%, and revenue from its telecommunications management business surged 69.1%.
AT&T; is boosting wireless sales with its Digital One Rate calling plans that charge a single rate for all calls made anywhere in the U.S. The company now has more than 1 million Digital One Rate customers and is adding more than 100,000 a month.
The plan also helped AT&T; reverse a decline in the average monthly bill for its wireless customers. It said its average bill rose 15% to $60.60, well above the industry average of less than $50.
AT&T; Chief Financial Officer Daniel Somers said sales growth this year will be at the upper end of its 5% to 7% forecast, and he expects per-share earnings at the top end of a range of $2.13 to $2.20 for the full year.
AT&T; shares rose 6 cents to close at $53 on the New York Stock Exchange.
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