AT&T; Earnings Soar 74%

AT&T; Corp. said Thursday that first-quarter earnings rose 74% as strong brand loyalty coupled with cost cutting in its declining residential market gave the nation’s largest long-distance phone company an unusually high profit margin.

Net income rose to $529 million, or 66 cents a share, from $304 million, or 38 cents, in the same period last year. Revenue fell 12.5% to $7 billion.

The profit was 7 cents a share higher than the average expected by analysts, according to a survey by Thomson First Call.

The company is in the process of being sold to regional giant SBC Communications Inc., California’s dominant local phone company.

AT&T; Chairman David W. Dorman said approvals from various states were coming quickly, and he was “cautiously optimistic” that the merger could be completed by the end of this year. The $16-billion deal reached in late January was expected to take more than a year to complete.

Last summer, AT&T; stopped marketing its residential local and long-distance service to focus on its worldwide network and its large business and government customers.

Even though the number of residential customers has fallen 17% to nearly 3.9 million, most are sticking with the company so far. The company has eliminated advertising and marketing, but it accepts new customers who call in for service on their own, and about 200,000 people a month are signing up that way.

“Customers are selecting us based on the brand, and we’re open for business,” John Polumbo, chief of the consumer business, told analysts in a conference call Thursday.

The downsizing of the consumer division together with price increases in certain areas gave the company a 34% profit margin for the first quarter, up from 28% last year.

Continued pressure on prices as well as the loss of customers cut the division’s revenue 20%, and SBC and other regional network owners now can afford to wait for wholesale price increases this year to force AT&T; to raise residential prices, shooing customers away.

Any glow in those numbers is “specific to the AT&T; exit strategy,” said Banc of America Securities analyst David Barden in a note to investors.

AT&T;, which cut its workforce 23% last year from 61,600 employees to 47,100, will eliminate more than the previously announced 5,100 jobs this year. It would not, however, say how many more jobs will go.

AT&T; shares rose 32 cents to $18.75 on the New York Stock Exchange.