AT&T's 1st-Quarter Profit Rises More-Than-Expected 42% on Soaring
Sales -- !!!!:>
New York, April 27 (Bloomberg) -- AT&T Corp., the No.
1 U.S. phone company, said first-quarter profit rose a
better-than- expected 42 percent as sales climbed at
the fastest rate in three years, an early sign of
success for Chairman C. Michael Armstrong's push into
new markets and businesses.
Profit from operations rose to $1.78 billion, or 67
cents a share, from $1.25 billion, or 46 cents, a year
earlier. That beat the 63-cent average forecast from
First Call Corp. The results exclude
Tele-Communications Inc., the No. 2 U.S. cable-TV
company, which AT&T bought last month for $59.4
billion.
Armstrong boosted sales 6.1 percent to $13.61 billion
by focusing on wireless, Internet, data and
international services, the fastest-growing areas in
the communications market. Now he's adding cable-TV
companies with TCI and an $62.5 billion offer for
MediaOne Group Inc. to deliver more services and add
customers AT&T doesn't reach in its phone business.
''Armstrong's done everything he said he would,'' said
Michael Funsch, an analyst at Independence Investment
Associates, which owns about 8.84 million AT&T shares.
''They've executed very well so far.''
AT&T rose 1/2 to 53 7/16 in midafternoon trading of
11.5 million shares, making it the fifth-most active
U.S. stock. Earlier, it touched 55 11/16.
To be sure, AT&T hasn't shown its move into cable will
pay off. The company will sell phone services over
TCI's network in only a few markets this year. TCI's
sales rose 7.1 percent to $1.31 billion on a pro-forma
basis, not much better than sales of AT&T's phone
services.
AT&T shares have dropped about 6 percent since
Thursday, when the company unveiled the offer for
MediaOne. The stock has gained only 5 percent this
year, less than the 11 percent increase in the
benchmark Standard & Poor's 500 Index.
Separately, AT&T and Nippon Telegraph & Telephone
Corp. of Japan said they will form an alliance to sell
data services to multinational companies.
1999 Outlook
Sales to business customers rose 7.5 percent to $6.21
billion, while residential revenue fell 3.4 percent to
$5.49 billion. Wireless sales increased 40 percent and
revenue from AT&T Solutions and international ventures
surged 69.1 percent.
AT&T is boosting wireless sales with its Digital One
Rate calling plans that charge a single rate for all
calls made anywhere in the U.S. The company now has
more than 1 million Digital One Rate customers and is
adding more than 100,000 a month.
The plan also is helping AT&T reverse a decline in the
average monthly bill for its wireless customers. AT&T
said its average bill rose 15 percent to $60.60, well
above the industry average of less than $50.
The company added 130,000 customers for its new
personal network service that lets customers have one
per-minute price for wireless, calling card and
long-distance services.
Chief Financial Officer Daniel Somers said the company
expects second-quarter earnings of 45 cents to 49
cents a share, including TCI. Analyst expected 48
cents a share, the average estimate of eight analysts
polled by IBES International Inc.
On a conference call with analysts and investors,
Somers forecast second-quarter revenue growth of 5.5
percent to 6.5 percent. He expects per-shares earnings
for 1999 at the ''top end' of a range of $2.13 to
$2.20.
AT&T also raised its forecast for 1999 wireless
revenue growth to more than 20 percent. That's up from
earlier growth estimates of mid- to high-teens.
Including TCI, AT&T's total first-quarter sales rose
9.9 percent to $14.1 billion.
TCI Upgrade
Armstrong said an update of TCI's network that will
allow it to provide phone services is ahead of
schedule, and Somers said the cost of the upgrade is
in line with targets.
AT&T expects TCI's cash flow, or earnings before
interest, taxes and depreciation, to rise by the
''high single digits'' in 1999.
Operating expenses excluding TCI and charges fell less
than 1 percent to $10.77 billion. Fees paid to local
phone companies to complete long-distance calls fell
5.2 percent.
Selling, general and administrative expenses fell to
22.4 percent of sales from 25.5 percent in the
year-earlier quarter. Last year, AT&T reduced SG&A
expenses by about $1.65 billion as it cut more than
20,000 jobs. ''They've definitely taken the costs
out,'' said Eric Strumingher, an analyst at
PaineWebber Inc., who rates AT&T ''buy.''
In a bid to gain shareholder support for the MediaOne
bid, Armstrong has vowed to cut another $2 billion in
costs by the end of next year.
The first-quarter earnings reflect New York-based
AT&T's recent 3-for-2 stock split.
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