AT&T reports loss as long-distance sales weaken
By Richard Waters in New York
Published: July 23 2001 20:48GMT | Last Updated: July 23 2001 21:01GMT
Further steep declines in long-distance revenues and a $1.1bn write-down on its investment in an internet telephony company left AT&T with a loss of 5 cents a share in the latest quarter.
The company, which last week rejected a $40bn offer from Comcast for its under-performing cable television operations, also said that profit margins at the cable business were nearly 2 per cent lower than a year before.
However, profitability had increased from the first quarter of this year, with earnings before interest tax, depreciation and amortisation rising to 23.4 per cent of revenues. AT&T is due to issue a broader defence of its broadband strategy - and to justify why its margins lag industry norms of 40 per cent - in a presentation to investors and analysts on Tuesday.
Leaving aside one-off items, AT&T reported earnings per share of 4 cents for the latest quarter, slightly ahead of Wall Street estimates of 3 cents. However, that was still down heavily from the 47 cents a share it reported the year before. Revenues fell 3 per cent, to $13.33bn.
Michael Armstrong, AT&T chairman, had said earlier this year that the company was beginning to see the first signs that the severe pricing pressures in the long-distance voice business were moderating. However, the latest numbers showed continued big declines in long-distance revenues.
The company's consumer business suffered a revenue decline of 23.7 per cent, to $3.79bn, as customers continued to use wireless phones and email to handle more of their communications and as competition remained fierce. AT&T hopes to issue a separate tracking stock for its consumer business, echoing a similar step already taken by rival WorldCom.
The company's business services division, meanwhile, suffered a fall in voice revenues in "the low-teens", AT&T said. That more than offset growth from data and other services, leaving the division with a 1.8 per cent fall in revenues, to $7.09bn.
Ebitda at the business services division fell even faster, slipping by 7.5 per cent, as high-margin voice business declined and was replaced by lower-margin data services.
Revenues at the AT&T Broadband cable unit rose to $2.57bn, an increase of 13.7 per cent after adjusting for the impact of the MediaOne acquisition last year.
AT&T's latest numbers included a $1.1bn write-down of the company's investment in Net2Phone, an internet telephony company, offset in part by a $470m gain from the sale of its stake in Japan Telecom. The Net2Phone charged reflected "the market-wide decline in technology companies as well as consumer demand developing more slowly than initially expected," AT&T said.
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