AT&T Corp. posted a net loss of US$975 million for its first fiscal quarter as revenue continues to deteriorate in long-distance telecommunications. Still, AT&T's results were above analysts' expectations.
AT&T reported a net loss of $0.05 per diluted share from continuing operations and a total loss of $0.28 per diluted share, the company said in a release before New York financial markets opened Wednesday. The results include an accounting charge of $856 million related to adopting new financial accounting practices. AT&T reported net losses of $192 million in the same quarter last year. Analysts polled by Thomson Financial/First Call expected earnings of $0.03 a share in a consensus estimate.
Pro forma revenue for the Basking Ridge, New Jersey, carrier was $12.02 billion, an 8.4 percent decline from the first quarter of 2001. Pro forma revenue adjusts for the closure of Excite@Home Inc., the bankrupt cable Internet service provider in which AT&T held a 38 percent ownership stake. Pro forma also adjusts for the acquisition or sale of other cable assets. Reported revenue including those items declined 11.3 percent from the same quarter last year.
The profit margins for several AT&T business units remain under pressure from competition. AT&T Business reported a margin of 13.5 percent for earnings before interest and taxes, excluding other expense and income, compared with 16.5 percent in the year-ago quarter. AT&T Consumer reported a margin of 26.3 percent compared with 32.8 percent in the year-ago quarter. AT&T Broadband reported a margin of 19 percent, compared with 20.4 percent in the first quarter 2001, excluding the impact of the costs of merging the unit with Comcast Corp.
It's still a tough market, said David Dorman, AT&T's president, in a conference call. The company is facing pressure from "tightened customer spending, coupled with industry overcapacity and the tactics of several cash-starved players," he said.
Data and IP (Internet protocol) services continued to grow rapidly while long-distance revenue continued to shrink. Packet services revenue, including frame relay, IP and ATM (Asynchronous Transfer Mode) grew about 20 percent, the company said. Long-distance revenue declined about 19 percent.
With the spin-off of AT&T Wireless Services Inc. and the pending sale of AT&T Broadband, the remaining parts of AT&T are under pressure to produce.
"They spun off all the growth in the business," said David Cooperstein, research director for the telecom market at Forrester Research Inc. "They're basically in a spiral. This is a technology-driven decline, not a market-driven decline."
The question AT&T must answer is whether it can quickly change its networks from primarily carrying voice traffic to carrying data traffic, Cooperstein said. It must do this as soon as possible, because increasingly customers are choosing to use Internet-based communications -- such as e-mail, instant messaging and voice over IP -- instead of long-distance calls.
The company predicted annual revenue growth of in the low double digit percentages for its cable unit, long-distance revenue to decline by 20 percent or more for the year, and a 2 percent to 3 percent decline in revenue for its business services unit.