BellSouth to hang up payphone business as wireless grows
By Bloomberg News
Elmat comment: "More free pairs for ADSL"
February 2, 2001, 5:20 p.m. PT
BellSouth, which sells local phone service in the southeastern United States, said it's getting out of the payphone business by the end of 2002, partly because the boom in wireless usage has sapped its sales.
BellSouth will exit the payphone business gradually and be out of it completely by December 2002. The withdrawal will begin immediately, the company said in a statement.
The Atlanta-based company wants to concentrate on its high-speed, Internet and digital networks, its wireless data and voice business, and its operations in Latin America. Payphone usage has declined as more people carry cellular phones and wireless pagers, BellSouth spokesman David Blumenthal said.
''Wireless obviously has cannibalized the payphone industry,'' said Guzman analyst Patrick Comack, who has a ''buy'' rating on BellSouth shares. ''The hidden agenda here is that by removing payphones, it forces people to use wireless even more.''
Another factor in the decision is the recent decrease in certain rates paid by long-distance carriers to payphone providers, the company said. BellSouth has about 143,000 payphones in the southeastern United States.
Blumenthal said the company is giving almost two years of notice to allow alternative payphone providers to begin service in those locations and to allow BellSouth to sell existing payphones to those providers.
Not all of the payphones will stay in service, said BB&T Capital Markets analyst Rex Mitchell. BellSouth was obligated to place payphones in areas such as community centers, remote highways and similar locations that other providers won't be eager to serve.
''Maybe 40 percent of the phones are so unprofitable that no one wants them,'' said Mitchell, who has a ''strong buy'' rating on BellSouth shares. ''My guess is (BellSouth) will lose a lot more expenses than they will revenues.''
About 40 percent of people in the United States have wireless phones, Comack said.
BellSouth sells local phone service in nine states from Florida to Kentucky. Its shares fell $1.55 at $41.45 in New York Stock Exchange trading.
Copyright 2001, Bloomberg L.P. All Rights Reserved
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