AT&T Posts $7.12 Billion Loss for the 3Q

NEW YORK – AT&T Corp. swung to a third-quarter loss of $7.12 billion due to huge charges from the company’s retreat from traditional telephone services, which included at least 7,500 more job cuts and a writedown in the value of the company’s long-distance network.

The loss reported Thursday amounted to $8.95 per share for the July-September period. The results, which topped more pessimistic analyst forecasts, reflect writedown and severance costs of $12.47 billion, as well as a resulting $4.38 billion tax benefit and after-tax savings of $331 million on depreciation thanks to the writedown.

Excluding the charges and benefits, AT&T would have reported a profit of $262 million, or 33 cents a share, a performance bolstered by considerable cost savings from the aggressive restructuring effort. In the same quarter last year, AT&T earned $418 million, or 53 cents a share.

Third-quarter revenues totaled $7.6 billion, down 11.7 percent from $8.65 billion a year earlier, but the decline was less than many analysts had projected.

Shares of AT&T rose 20 cents to $15.78 by late morning on the New York Stock Exchange.

Broken down, business services revenue fell 10.4 percent to $5.65 billion as voice and data services suffered from ongoing price battles, competition from cell phones and nagging economic jitters.

Consumer revenues fell 15.2 percent to $1.98 billion, driven by a sharp dropoff in new customers with AT&T’s decison to stop marketing local and long distance. Long-distance price wars and the loss of business to wireless and Internet-based calling also took another bite from revenues.

AT&T, still the nation’s largest long-distance company with 26 million customers, had warned two weeks ago that it would be slashing the book value of its assets by about $11.4 billion now that its network is expected to generate far less revenue from consumer voice traffic.

The decision to cut spending on new customer acquisitions followed a federal court decision that will make it more expensive for AT&T to sell local service by leasing residential lines from the four regional Bells – who at the same time are luring away AT&T’s long-distance customers.

When it announced the writedown, AT&T also said it was expanding this year’s job cuts to more than 20 percent of the work force, or at least 12,500 jobs. The company had previously projected a downsizing of 8 percent of the work force or about 4,900 positions. More than 9,000 of the affected employees have either already left the company or been notified they were being laid off.

To cover severance benefits and other costs related to those cuts, AT&T said it would record a charge of about $1 billion with the third-quarter results.

The savings from those cuts and the reduced marketing expenses were apparent in Thursday’s report:, with the costs of selling and related efforts falling to $1.60 billion compared with $1.76 billion in this year’s second quarter and $1.79 billion in the third quarter of 2003.

For the first nine months of 2004, AT&T has lost $6.70 billion, or $8.44 per share, on revenues of $23.26 billion. In the same period in 2003, AT&T posted a net profit of $1.53 billion, or $1.94 per share, on revenues of $26.43 billion.