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January 18, 2013

AT&T to take $10bn charge following pension plan loss

AT&T reduced its forecast of long-term gains on pension plan assets from 8.25% to 7.75%

By CBR Staff Writer

US telecom firm AT&T is planning to take a $10bn write down in its fourth quarter (Q4) earnings in a bid to cover loss in funds related to pension and postretirement-benefit plans folllowing declining interest rates.

The telecoms firm said in a statement filed with the Securities and Exchange Commission that for the quarter ended 31 December 2012, the firm expects to record a non-cash, pre-tax charge of approximately $10bn related to actuarial gains and losses on pension and postemployment benefit plans.

"At December 31, 2012, we lowered our assumed discount rate to 4.3%, resulting in an actuarial loss of approximately $12.0 billion," the firm said.

According to the firm, the move was mandatory after it reduced its forecast of long-term gains on pension plan assets from 8.25% to 7.75% over sustained uncertainty in the securities markets and US economy in 2013.

The firm also revealed that the pension loss will not have any impact on operating results or margins, but that its operating income would be cut by $175m due to the effects of Hurricane Sandy and other storms which hit its Wireless segment.

During the quarter, its smartphone sales reached 10.2 million devices, while the high subsidies on the devices has affected the company’s operating income, margins, and earnings per share.

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