AT&T; Posts $520-Million Profit
AT&T; Corp. painted a positive picture Friday with what might be its final earnings report before becoming part of SBC Communications Inc., topping Wall Street forecasts with third-quarter net income of $520 million and boosting its revenue forecast for the second time this year.
The iconic telephone company, which in January agreed to be acquired by SBC for $16 billion, also expressed optimism that the deal would close before the end of the year, winning regulatory approval without concessions such as asset sales or price freezes.
Despite the upbeat report, AT&T;’s results reflected the persistent competitive turmoil of the telecommunications industry, which has reduced the once mighty company’s customer base by two-thirds over the last decade -- from roughly 60 million at the peak to fewer than 20 million at the end of the latest quarter.
“AT&T;’s employees across all areas of the company have done a fantastic job of transforming our business in the face of adverse and chaotic conditions in our sector,” Chief Financial Officer Thomas Horton said.
The profit reported Friday amounted to 64 cents a share for the three months that ended Sept. 30. The results included a $92-million expense relating to investments in aircraft leases with airlines that have filed for bankruptcy, as well as $20 million in expenses for the SBC deal and a $41-million pretax benefit.
In the third quarter of 2004, AT&T; lost $7.15 billion, or $8.99 a share, as the company wrote down the book value of its national telecommunications network by $11.4 billion after it made a decision to retreat from the consumer telephone business. Excluding that expense, other restructuring charges and one-time tax benefits, AT&T; would have earned $262 million, or 33 cents, a year ago.
The latest results appeared to top Wall Street forecasts by a sizable margin, although Thomson Financial said the assortment of one-time charges and credits made it unclear whether the 51-cent profit forecast from its analyst survey was directly comparable to the figures emphasized in AT&T;’s report.
Shares of AT&T; rose 43 cents, or 2.3%, to close at $19.01.
Third-quarter revenue fell 13% to $6.62 billion, as the long-distance calling and data businesses continued to shrink, AT&T; said. Business services accounted for $5.1 billion of the revenue total and consumer services generated $1.5 billion.
Although competitive pressures continue to squeeze the business, the company said its overall revenue decline for 2005 might be smaller than previously expected.
AT&T; said it now projected full-year revenue of at least $26.5 billion, about $500 million above the forecast issued by the company after the second quarter. The company also boosted its estimate for operating profit margin, predicting a percentage “in the low teens, outpacing prior expectations.”
SBC and AT&T; originally said their deal would close in the first half of 2006, but now say it could close before January. They have secured government approval for the deal from all but a few key states, and are waiting to see whether regulators at the Justice Department and Federal Communications Commission will seek any conditions before allowing it to proceed.
