SBC Suspends Michigan Long-Distance Bid
Facing rejection from federal regulators, local telephone giant SBC Communications Inc. on Wednesday withdrew its application to provide long-distance service in Michigan, one of its major areas of operation.
SBC, the dominant local carrier in California and 11 other states, retreated after questions arose about wholesale billing discrepancies involving rivals that lease its network parts.
The company said it will address that issue and other matters and resubmit the application within a month to the Federal Communications Commission. The FCC would have 90 days to act on the request.
Separately, the San Antonio company said it will take a one-time charge of $1.13-billion against first-quarter earnings to adjust for a change in the way it accounts for directory book sales and expenses. Instead of booking income and expenses in the quarter in which the directories are printed and issued, it will apportion the revenue and costs evenly across all four quarters.
The noncash charge, the equivalent of 34 cents a share, will partly offset a previously announced adoption of another accounting method, which changed the way SBC handles depreciation of its network and other assets. That switch amounted to a one-time noncash gain of $3.68 billion, or $1.10 a share, for the first quarter.
The accounting changes together will increase net income by $2.55 billion, or 76 cents a share, when first-quarter results are released next week.
Withdrawing the Michigan application temporarily stalls the nation’s second-largest local phone company from its drive to be a one-stop phone service shop in each of its 13 states. The FCC on Monday approved SBC’s plans to enter the long-distance market in Nevada, leaving the company with applications pending in the five Midwest states it picked up in the 1999 acquisition of Ameritech Corp.
Jeff Kagan, an independent analyst based in Atlanta, said he expects SBC to win approval after it reapplies.
“The bad news is this is frustrating for those customers who were anticipating SBC’s entry into long-distance,” he said.
Under the Telecommunications Act of 1996, the Baby Bell companies that picked up local service monopolies in the 1984 breakup of AT&T; Corp. can be approved to sell long-distance service once they meet a list of state and federal criteria, including how much they open their local market to competition.
FCC Commissioner Michael K. Powell said in prepared remarks that he thought SBC “generally met” the criteria for offering long-distance in Michigan. He called the outstanding issues “very narrow, but nonetheless important.”
SBC’s stock lost 96 cents, or 4.5%, to close Wednesday at $20.29 a share on the New York Stock Exchange. Shares of other major telecommunications companies also fell Wednesday.
The industry has long been hurting from overcapacity, huge debts, stiff competition, falling prices and lower demand. Major telecom companies are preparing to release next week what analysts anticipate will be poor to lackluster earnings for the first quarter.
