Without that impact, normalized EPS would have been 59 cents. Normalized EPS in the third quarter of 2000 was 55 cents.
Third quarter data revenues exceeded $1.1 billion and represented more than 15 percent of the company’s total revenues. It was BellSouth’s third consecutive $1 billion-plus quarter for data revenues, which increased at an annual rate of 27.7 percent, compared to 25.3 percent growth in the second quarter of 2001. The company finished the third quarter with 463,000 DSL customers.
The bulk of BellSouth’s data revenue growth continues to be driven by high-speed, high-capacity services for business customers, including products such as Frame Relay. In Network Magazine’s recent North American Carrier Survey, 4,000 corporate and business telecom managers rated BellSouth No. 1 in Frame Relay, a high-speed packet switching technology. BellSouth also offers Frame Relay Secure for backup and redundancy. The company’s comprehensive array of Managed Security Services includes managed firewall, intrusion detection and response, anti-virus and anti-vandal filters, and Web site blocking.
BellSouth’s domestic wireless revenues were $1.5 billion in the third quarter of 2001. This was a gain of 38.1 percent compared to revenues from BellSouth’s stand-alone domestic wireless operations in the third quarter of the previous year. (Cingular Wireless services revenues increased 13.6 percent.) Cingular, the second largest wireless company in the U.S., had 21.3 million cellular and PCS customers at September 30, an annual growth rate of 12.8 percent. This week, Cingular announced an innovative infrastructure joint venture with VoiceStream Wireless that will allow Cingular to offer service in New York City much more quickly and cost effectively than building its own network.
Consolidated Latin America revenues, including advertising and publishing, were $710 million in the third quarter. Earnings before interest, taxes, depreciation and amortization, or EBITDA, increased 17.3 percent to $224 million, and EBITDA margin improved by 6.6 percentage points, to 31.3 percent, compared to the third quarter of 2000. BellSouth had 8.1 million customers in Latin America at the end of the third quarter, an annual growth rate of 21.4 percent. In four of the 11 countries BellSouth serves in Central and South America, mobile phone customers now outnumber fixed line subscribers.
Following unanimous approval by the Public Service Commissions (PSC) in Louisiana (September 19) and Georgia (October 2), BellSouth filed an application October 2 with the Federal Communications Commission to offer long distance service to customers in those two states. On October 4, the Mississippi PSC also unanimously endorsed BellSouth’s state-level filing to provide long distance service.
On a reported basis, EPS in the third quarter of 2001 was breakeven. Reported results were affected by a number of special items:
BellSouth recorded a charge of 54 cents per share resulting from the impairment of certain strategic investments in publicly traded and private equity securities — principally its investment in Qwest Communications International. As required under generally accepted accounting principles, BellSouth regularly monitors and evaluates the realizable value of its investments.
In addition, BellSouth sold approximately 4.5 million shares of Qwest during the quarter, resulting in a loss of 3 cents per share.
During the quarter, BellSouth closed on the sale of its 24.5 percent interest in Skycell, a wireless carrier in India, resulting in a gain of 1 cent per share.
Adjusted to include BellSouth’s 40 percent share of Cingular, total revenues of $7.5 billion increased 7.7 percent compared to the third quarter of 2000. Normalized net income in the third quarter this year was $1.063 billion, compared to $1.036 billion in the same quarter a year ago. Third quarter reported net income was $7 million in 2001 and $1.036 billion in 2000 (same as normalized amount).
BellSouth will record an after-tax charge of $170 million to $200 million (9 to 10 cents per share) during the fourth quarter reflecting restructuring actions and related asset impairments. These actions are being taken to reduce operating costs in response to a slowing economy and increased competition. Targeted reductions will be largely focused on staff support functions, resulting in the elimination of approximately 3,000 positions.
