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Decline in Long-Distance Expands Loss for AT&T


AT&T Corp.'s loss widened to nearly $1 billion during the first quarter as the nation's largest long-distance telephone company continued to lose customers to mobile phones, prepaid calling cards and cheaper service plans.

On Wednesday, the company posted a loss of $975 million, or 28 cents a share, on revenue of $12.02 billion, compared with a loss of $192 million, or 10 cents a share, on revenue of $13.55 billion during the same period a year earlier.

Accounting changes contributed $856 million, or 24 cents a share, to the loss total, AT&T said. Excluding some expenses, the company posted a profit of 6 cents a share, beating estimates of 4 cents a share.

Long-distance voice services declined 19% from the same quarter a year ago.

"It's actually a very basic, intuitive answer," said Alex Mou, senior analyst with Hotovec, Pomeranz & Co. "People are going to find alternative ways of communicating, and I think that sort of reflects in the overall equation."

Serving 1.3 million customers in four states, AT&T's consumer unit posted a 22% drop in revenue to $3.13 billion. During the quarter, the company launched local service in Michigan and Georgia.

The broadband unit reported revenue of $2.44 billion, down 1.1% from the quarter a year ago. AT&T said it plans to spend $1.1 billion this year on plant upgrades to reduce customer turnover and improve technologies. The unit added more than half a million customers during the three-month period.

AT&T's business unit reported an 8% drop in revenue to $6.53 billion, due in part to the decline in long-distance services.

The New Jersey company's report comes one day after AT&T Wireless Services Inc., which was spun off from the company in July, posted a first-quarter loss. A number of other telecom and wireless companies also have seen losses this year.

Though the company is a favorite in many portfolios, Mou said that with long-distance "going down hard," the company's cable division is the only attractive entity. But AT&T agreed in December to sell the unit to Comcast Corp. for $72 billion and the company is planning a 1-for-5 reverse stock split to boost its share price after the deal closes.

"They slightly beat the numbers, but I'm not too impressed on what they're trying to offer longer term," Mou said. "We believe that AT&T is on the road down."

Shares closed down 10 cents at $13.75 on the New York Stock Exchange. Earnings were reported before the start of regular trading.

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