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April 22, 2004

AT&T earnings down 47% as revenue falls 11%

America's largest long-distance telephone carrier AT&T Inc has reported revenue down 11%, while profit fell 47%, as the company experienced stiff competition from local and mobile operators, as well as having to deal with restructuring and other charges.

By CBR Staff Writer

For the first quarter ending March 31, the carrier posted net income of $304m, a figure that included a tax benefit related to a prior investment, losses on the early retirement of debt, and restructuring and other charges. In the year ago-quarter it posted net income of $571m. The year-ago quarter also included income related to the cumulative effect of the adoption of a new accounting standard.

AT&T said sales fell to $7.99bn, down from $8.98bn a year ago. However, analysts had been looking for revenue of $7.96bn, so the market reacted relatively mildly to the results, and its shares had fallen only 4.2% to $17.80 as of 5pm GMT.

David Dorman, chairman and chief executive, said the group continued to manage through a difficult industry environment characterized by oversupply and intense pricing pressure.

He said: We remain focused on leading the technology transformation in telecom, diversifying our product offerings to include new offers such as VoIP and wireless, improving our cost structure and building on our financial strength.

The Bedminster, New Jersey-based carrier attributed the revenue fall to the continued declines in long-distance telephone and data revenue. Yet this was partially offset by the continued success of AT&T consumer’s bundled local and long-distance offering.

AT&T business revenue fell 9.1% to $5.87bn from $6.46bn a year ago because of pricing pressure, competition and weakness in demand for retail long-distance voice and data.

AT&T consumer revenue fell 16% to $2.12bn from $2.51bn a year ago, driven by lower standalone long-distance voice revenue due to competition from other long-distance companies as well as wireless and Internet calling, and customer migration to lower-priced products and calling plans.

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AT&T said it ended the quarter with net debt of $8.4bn, representing a $400m decrease from year-end 2003.

Essentially, US-based long-distance carriers such as AT&T have suffered from the rise of mobile phones, lackluster spending by corporate customers, and tough competition from the Baby Bells that have started to attack the long-distance market.

A future worry was added this week, after the US Federal Communications Commission ruled that AT&T and other long-distance carriers must pay full access fees for calls made over the internet, if they begin and end over ordinary local phone services. This could badly affect the take-up of VoIP, which AT&T has been heavily promoting.

This article is based on material originally published by ComputerWire

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