BellSouth’s Profit Declines 14.6 Percent

Oct. 26–BellSouth’s third-quarter net income fell 14.6 percent from a year earlier after hurricanes boosted costs and customers continued to disconnect local phone service.

Although competition remains fierce, there are signs that customer disconnections — line losses — are beginning to moderate.

For example, the net line loss for retail residential customers was the lowest in more than 10 quarters, UBS analyst John Hodulik noted. Business-line trends also improved, he said.

Still, BellSouth’s chief financial officer, Ron Dykes, remained cautious, pointing to still-fierce competition from wireless and other providers.

“We’re going to have to watch the trend and see where that takes us,” said Dykes in a conference call with analysts.

As it was, net income fell to $799 million, or 44 cents a share, from $936 million, or 51 cents, a year earlier. Revenue declined about 1 percent to $5.1 billion.

In BellSouth’s consumer business, higher revenue from long-distance and high-speed Internet service almost offset revenue declines from line losses, Dykes said.

Including BellSouth’s 40 percent portion of Cingular Wireless, revenue rose 0.4 percent to $6.7 billion. Profit, excluding some items, fell 3.6 percent to $893 million, or 49 cents a share. Wall Street had expected 51 cents.

Hurricanes Charley, Frances, Ivan and Jeanne trimmed profit by a penny a share. Restoring service to 1.2 million customers cost BellSouth $38 million in added labor and material costs. The carrier expects an additional $90 million in hurricane-related costs in the current quarter.

Costs related to Cingular’s acquisition of AT&T Wireless Services, expected to be approved by federal regulators this week, reduced profit by a penny a share.

Analysts expect BellSouth to get some relief from the stiff competition as some rivals, including AT&T and MCI, pull back from providing traditional wire-line service for consumers.

That follows a federal court decision that will make it more expensive for those competitors to sell local service by leasing residential lines from BellSouth and other dominant local providers.

AT&T, for example, announced in July that it no longer would spend money to seek consumers for its long-distance or local service.

Access lines resold by BellSouth’s competitors fell by 54,000 in the third quarter. In the year-earlier period, they increased by 188,000.

As of Sept. 30, BellSouth employed 63,132 workers, down 4.6 percent a year earlier. Last month, BellSouth’s workers who are members of the Communications Workers of America ratified a five-year labor contract.

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