AT&T Loss Adds to Telecom Sector Woes
Tuesday July 23, 4:48 pm Eastern Time
Reuters Business Report
By Ellen Wulfhorst
NEW YORK (Reuters) - Bad news keeps calling in the telecommunications industry, as a big loss posted by long-distance giant AT&T Corp. (NYSE:T - News) on Tuesday brought reported second-quarter losses in the industry to more than $20 billion in just two days.
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Suffering from an exodus of customers to wireless phones and electronic mail, stiff competition and overcapacity, AT&T joined Lucent Technologies Inc. (NYSE:LU - News), SBC Communications Inc. (NYSE:SBC - News) and BellSouth Corp. (NYSE:BLS - News) in reporting gloomy news -- all in the wake of the largest-ever bankruptcy filing by WorldCom Inc. (Nasdaq:WCOEQ - News)
"Everyone's getting killed," Morningstar analyst Todd Bernier said. "It's just a brutal, brutal market right now."
AT&T, the nation's biggest long-distance telephone and cable-television company, posted a $12.7 billion second-quarter loss after charges to write down the value of some assets.
Revenue fell more than 6 percent as sales and calling volumes flagged. Sales to residential customers in particular plunged by more than a fifth as users opted for wireless phones and Internet services over long-distance calls.
Yet AT&T benefited somewhat from the woes of rival WorldCom, as customers sought alternative service providers.
WorldCom, the second-largest U.S. long-distance telephone and data services company that transmits half of the world's Internet traffic, filed for bankruptcy protection on Sunday, sunk by a $3.85 billion accounting scandal and a heap of junk-rated debt.
AT&T also said it saw some light at the end of the tunnel -- that the rate of customers shifting to wireless phones and e-mail had begun to stabilize.
Shares of AT&T closed down 72 cents at $8.80 in Tuesday trading on the New York Stock Exchange.
Telecommunications equipment maker Lucent posted a $7.91 billion net loss, including a large noncash charge, also on Tuesday. It said it would have to cut another 7,000 jobs because the telecom spending slowdown had not relented.
Lucent shares closed off 45 cents, or 21.43 percent, at $1.65, also on the NYSE.
"There's no reason to believe right now from these results that the (telecom) industry has stabilized," telecom industry analyst Tom Lauria said.
SBC Communications, the No. 2 U.S. local telephone company that dominates the Midwest and Southwest, was less than optimistic about its outlook.
Battling lower spending by customers and competition in local phone markets, SBC on Tuesday said it earned $1.8 billion, compared with $2.1 billion a year earlier. It said it expects such trends to continue in the near term and expects full-year earnings below Wall Street forecasts.
It also said its results were hurt by an $84 million reserve related to the WorldCom bankruptcy.
Its sister Baby Bell, BellSouth Corp. (NYSE:BLS - News), on Monday also posted lower profits and cut its full-year growth outlook. The nation's No. 3 local telephone company, which operates in nine Southeastern states, said slack demand and turbulent economic conditions hurt its second-quarter results.
"We've ... seen signs that recovery and growth are not imminent," BellSouth Chief Financial Officer Ron Dykes said. "Business failures and bad debt continue to take their toll."
The BellSouth news sent its stock tumbling to a five-year low on Monday, and the shares continued to drop on Tuesday, closing down $1.31, or 5.79percent, at $21.30 in trading on the NYSE. SBC shares closed down 66 cents, or 2.75 percent, to $23.30, also on the NYSE.
The North American Telecom Index (AMEX:^XTC - News) was down 7.87 percent on Tuesday. |
