As expected, the timing of SBC’s investments in its growth initiatives during 2000 impacted first-quarter expense and earnings comparisons. The slowing US economy also dampened growth. First-quarter earnings were $1.7 billion, or $0.51 per diluted share, before one-time items, compared with $1.9 billion, or $0.56 per diluted share, in the first quarter a year ago. Operating revenues for the quarter, including results from Cingular, increased 4.7% to $13.1 billion.
First-quarter revenue growth was adversely impacted by SBC’s sale of Ameritech’s security-monitoring business. Excluding results from this divestiture as well as shifts in directory publishing dates and the pro forma effect on the year-ago quarter of the Cingular venture, first-quarter revenues increased 6.7%.
Primarily because of weakening US economic conditions, SBC expects earnings per share for 2001, before one-time items, in the $2.35 to $2.40 range.
The economy is having a greater impact on our business than we projected, said Edward E. Whitacre Jr., SBC chairman and CEO, in a media release. We handled the first-quarter revenue shortfall well, thanks to very disciplined expense management. Going forward, we are determined not to lose sight of our larger strategic mission – including fully developing our broadband capabilities and obtaining long-distance relief in our states as quickly as possible – and we will not compromise our long-term future to preserve near-term projections.
Broadband is the foundation for a host of new value-added services, and we will continue to pursue it aggressively, Mr Whitacre continued. Long distance complements our broadband strategy, and this year we have the potential to increase our long-distance opportunity from two states to eight states. Looking ahead, we will continue playing to our strengths, and our adjusted game plan for 2001 should yield a much more stable and predictable growth profile for the future.
SBC’s data revenues increased 39.9% to $2.1 billion, compared with $1.5 billion in the same quarter last year. The company’s data revenue stream has nearly doubled in the past two years. SBC added 187,000 new DSL (Digital Subscriber Line) customers during the first quarter, for a total of 954,000 DSL subscribers, as strong demand continues for high-speed Internet access and bandwidth-hungry applications. Revenue from data products and services accounted for 21% of SBC’s first-quarter total wireline revenues, compared with 16% in the year-ago period. The company’s DSL initiative continues to roll out, making DSL available to 21.7 million of SBC’s metro-area wireline customer locations, up from 12.9 million a year ago. SBC’s core data transport products, including SONET, DS3s, and ATM, also showed strong first-quarter growth that was driven by enterprise customers whose increased use of sophisticated applications requires significantly more bandwidth.
A net gain of 854,000 wireless subscribers at Cingular Wireless during the first quarter brings the company’s subscriber total to 20.5 million at the end of the first quarter. Cingular’s wireless services revenues increased 14.8 percent to $3.1 billion compared with pro forma levels in the year-ago quarter. Cingular also added 84,000 new subscribers to its Cingular Interactive operation, which includes two-way messaging and other wireless data services. Cingular successfully launched its nationwide brand in January with the support of a national advertising campaign. Also during the first quarter, Cingular expanded its geographic reach to the Seattle and Spokane markets where the company has an all-digital GSM (global system for mobile communications) operation supported by 50 retail stores.
SBC’s long-distance business expanded during the first quarter as the company on March 7 began offering long-distance service to customers in Kansas and Oklahoma. At the end of the first quarter, the company had 2.2 million long-distance lines in Texas, Kansas and Oklahoma. SBC has filed an application at the Federal Communications Commission to enter the long-distance market in Missouri, and the company expects a decision in the coming weeks. Also, the company has applications pending with regulators in California, Nevada and Arkansas.
Including one-time items, SBC’s reported net income for the first quarter of 2001 was $1.9 billion, or $0.54 diluted earnings per share, compared with $1.8 billion, or $0.53 per share, in the first quarter of 2000.
Reported net income for the first quarter of 2001 includes the following one-time items: pension settlement gains of $330 million related to management employees, primarily resulting from a previously announced voluntary retirement program net of costs associated with that program; and combined charges of $205 million related to impairment of the company’s cable operations.
