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AT&T 4Q Income Beats Street Expectations

Posted on: Thursday, 26 January 2006, 12:00 CST

SAN ANTONIO - AT&T Inc., the nation's largest telecommunications provider, on Thursday reported fourth-quarter net income that beat Wall Street expectations, reflecting growth in wireless, broadband and business services.

For the quarter ended Dec. 31, AT&T said its net income totaled $1.66 billion, or 46 cents per share. Excluding merger-related, severance, and Cingular Wireless hurricane costs and a gain from tax settlements, adjusted earnings were 48 cents per share.

On average, analysts surveyed by Thomson Financial forecast quarterly income of 45 cents per share.

SBC Communications Inc. completed the purchase of AT&T Corp. on Nov. 18 and took the AT&T name. Results in the latest quarter and for the full year combine the two companies' operations after that date.

Total operating revenue during the quarter was $12.97 billion, AT&T said.

For all of 2005, the combined SBC-AT&T reported net income of $4.8 billion on revenue of $43.9 billion.

"We continue to execute well across our operations, and we have moved quickly on merger integration," said Edward E. Whitacre Jr., AT&T chairman and chief executive. "The assets we acquired are in excellent shape, we did a thorough job of merger planning, we have retained key talent, and customer response to the new AT&T has been very positive."

Rick Lindner, the company's chief financial officer, told analysts Thursday that AT&T would continue its efforts to cut costs as a way to further improve profitability.

He said the former SBC eliminated more than 2,400 jobs in the latest quarter and more than 10,000 positions for the year, most of them through attrition.

Cingular Wireless, the No. 1 wireless carrier in the United States, added 1.8 million net subscribers during the quarter, while the subscriber turnover rate declined to a record-low 2.1 percent, AT&T said. Cingular is 60 percent owned by AT&T and the other 40 percent by BellSouth Corp.

AT&T said its wireline revenue growth continued for the seventh straight quarter, with consumer revenue up 4.6 percent and business revenue up 1.9 percent.

Meanwhile, DSL/Internet revenue rose 21 percent and DSL lines in service exceeded 6.9 million, up 425,000 in the quarter and 1.8 million for the year. Long-distance revenue was up 13.4 percent in the quarter.

AT&T saw a drop in 129,000 residential local-phone lines and 54,000 business lines in the quarter, but Lindner said many of those business customers are merely switching to newer AT&T offerings.

Thomas Watts, an analyst with SG Cowan & Co. in New York, said it's hard to get a clear picture of AT&T after less than one quarter as a combined entity, but he likes the current trends amid increasing competition from cable companies.

"We saw that (AT&T) has been able to grow its number of total subscribers," he said. "Broadband increases have offset losses in voice ... The future is a data link to the home, not a voice link."

For the full quarter, the former AT&T Corp.'s pro forma business revenue declined 8.3 percent, reflecting continued pricing pressures in traditional voice and data products, offset in part by growth in IP-based products and E-services.

The company generated $4.59 billion in cash from operations in the fourth quarter, which it used to pay down debt and repurchase $1.1 billion worth of shares, Lindner said. For the year, the company reported free cash flow of $5.6 billion.

Shares of AT&T rose 28 cents, or 1.1 percent, to $25.49 in afternoon trading on the New York Stock Exchange.

Source: Associated Press/AP Online

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