Retreat From Traditional Phone Service Causes Drop
By Bruce Meyerson
NEW YORK, Oct. 21 -- AT&T Corp. reported a third-quarter loss of $7.12
billion Thursday because of huge charges resulting from the company's
retreat from traditional telephone services, which included at least
7,500 more job cuts and a write-down in the value of the company's
The loss amounted to $8.95 per share for the period ended
Sept. 30. The results, which topped more pessimistic analyst
forecasts, reflect write-down and severance costs of $12.47 billion,
as well as a resulting $4.38 billion tax benefit and after-tax savings
of $331 million on depreciation thanks to the write-down.
In the corresponding quarter last year, AT&T earned $418 million, or
53 cents a share.
Third-quarter revenue totaled $7.6 billion, down 11.7 percent from
$8.65 billion a year earlier, but the decline was less than many
analysts had projected.
Shares of AT&T rose 22 cents, or 1.4 percent, to close at $15.80 on the New
York Stock Exchange.
Business services revenue fell 10.4 percent, to $5.65 billion, as
voice and data services suffered from ongoing price battles and
competition from cell phones.
Consumer revenue fell 15.2 percent, to $1.98 billion, driven by a
sharp drop-off in new customers following AT&T's decision to stop
marketing local and long-distance service. Long-distance price wars
and the loss of business to wireless and Internet-based calling also
AT&T, still the nation's largest long-distance company with 26 million
customers, said two weeks ago that it would reduce the book value of
its assets by about $11.4 billion now that its network is expected to
generate far less revenue from consumer voice traffic.
The decision to cut spending on customer acquisitions followed a
federal court decision that will make it more expensive for AT&T to
sell local service by leasing residential lines from the four regional
phone companies -- which at the same time are luring away AT&T's
When it announced the write-down, AT&T also said it was expanding this
year's job cuts to more than 20 percent of the workforce, or at least
12,500 jobs. The company had previously projected a downsizing of 8
percent of the workforce, or about 4,900 positions. More than 9,000 of
the affected employees have either already left the company or been
notified they were being laid off.
To cover severance benefits and other costs related to those cuts,
AT&T said it would record a charge of about $1 billion with the
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[TELECOM Digest Editor's Note: Poor AT&T ... how long do you think it
will be until we report here that they went bankrupt completely, or
maybe are totally gone, like Western Union? PAT]