AT&T warns on 4Q profit
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October 25, 2000: 1:08 p.m. ET
Edges past 3Q forecasts but says long-distance pricing to hurt 4Q, 2001
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NEW YORK (CNNfn) - AT&T Corp. edged past third-quarter earnings estimates but warned that fourth-quarter profit from operations will miss analysts' forecasts due to continued pricing pressure on its long-distance business.
On the day the company announced it plans to split into four different business units, Charles Noski, the telecom company's chief financial officer, told analysts that operating earnings per share should be 29-to-33 cents a share. Analysts surveyed by earnings tracker First Call had forecast a fourth-quarter profit of 36 cents a share, down from 57 cents a year earlier.
For the third quarter, AT&T posted earnings excluding special items of $1.4 billion, or 38 cents a share. That's 2 cents above the consensus of analysts surveyed by First Call but down 24 percent from the $1.6 billion, or 50 cents a share, reported a year earlier.
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AT&T EARNINGS WOES
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While AT&T edged past 3Q earnings forecasts, it said it is seeing steeper than expected declines in pricing and profitablilty of its long distance business, hitting 4Q and 2001 earnings guidance 3Q EPS of 38 cents vs. 36 cents forecast
4Q guidance calls for 29 to 33 cents EPS vs. 36 cent estimate
Wireless revenue up 36.6 percent
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The company said that the pricing pressure on long-distance business is even tougher than anticipated.
"We have long anticipated declines in voice long-distance revenue," said Noski said, "but the pace of strong price competition and customers shifting to wireless and Internet technologies has rapidly accelerated across the industry.
"The competitive price declines from our mature voice long-distance businesses will lower our revenue expectations and affect our financial results for the fourth quarter of 2000 and full year 2001," he added.
That gloomy outlook for the company's core long-distance service hurt the AT&T's stock Wednesday, even with the move to split the company's stock into four separate issues. Shares of AT&T (T: Research, Estimates) lost $3.44 to $23.44 in trading Wednesday.
"The declines in that (long distance) business are much sharper than expected, especially in the consumer area," Patrick Comack, analyst with Guzman & Co., told CNNfn's Market Call program Wednesday. "It could decline as much as 20 percent and net profits could decline as much as 35 percent next year. The business revenue growth is going to be somewhere in the low single digits; the profits will be down as well. The positive thing that came out today is the break-up. I think that will create value. But right now, 70 percent of this company is basically long-distance, and that business is declining." (403KB WAV) (403KB AIFF)
Revenue rose to just under $17 billion from $16.3 billion a year earlier. Business services revenue gained 2.5 percent to $7.1 billion, but consumer services revenue fell 10.9 percent to $4.7 billion. Wireless revenue gained 36.6 percent to $2.8 billion, while broadband revenue rose 10.8 percent to $2.4 billion.
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MA BELL'S NEW CHILDREN
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AT&T Corp. unveiled its long-awaited break-up plan Wednesday, saying it will divide into four separate publicly traded companies that will bundle each other's services through inter-company agreements. Units to include consumer, business, broadband and wireless
Cut in dividend announced
Split will take two years to implement
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A new earnings per share range for 2001 was not given by the company. First Call's forecast for 2001 calls for a profit of about $1.68 a share, compared with the company's new earnings guidance of $1.66 to $1.70. The company said it will provide more guidance when reporting fourth quarter results in January.
The company reported results separately for its wireless unit. Operating earnings before interest, taxes, depreciation and amortization, known as EBITDA, rose to $105 million in the latest quarter from $54 million a year earlier.
The company also said the number of wireless subscribers, including those acquired in 2000, increased 38.4 percent. Excluding the acquisitions, the subscriber growth rate was 27.3 percent.
Shares of AT&T Wireless (AWE: Research, Estimates) gained $2.13 to $23.75 in trading Wednesday.
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AT&T
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