In addition, SBC expects EBITDA (earnings before interest, taxes, depreciation and amortization) margins to return this year to levels it recorded in 1998 and 1999. The company also expects 2001 capital expenditures to be comparable with 2000 levels, and as a result, it expects to achieve an improved return on invested capital.
SBC expects the trajectory of its 2001 earnings growth will be shaped by three factors: consistent revenue growth; a stable cost structure brought about by disciplined expense management across its operations; and, after the first quarter this year, more favorable quarterly expense comparisons with 2000 levels, which were impacted by spending to ramp up new business units and new initiatives.
Beginning in the second quarter of 2000, SBC’s expenses increased due to its acquisition of Sterling Commerce and the ramp-up of new initiatives, most notably DSL (Digital Subscriber Line), national expansion, long distance, Cingular wireless and Ameritech service upgrades. These increased expenses will be reflected in SBC’s first-quarter 2001 results but because similar expenses did not exist in the first quarter of 2000, which preceded the initiatives’ launch, quarter-to-quarter comparison will be impacted.
As a result of these expense factors, SBC expects first-quarter 2001 earnings per share in the $0.50 to $0.53 range, with earnings per share in the second, third and fourth quarters of 2001 above the $0.60 level ? combining to deliver strong double-digit earnings growth for full-year 2001.
SBC has begun 2001 with good momentum in the marketplace, said Edward E. Whitacre Jr., chairman and CEO. Our core business and growth assets are solid, we have financial strength and flexibility, and we are intensely focused on operations and winning with customers. These factors add to our confidence that SBC is on track to achieve strong earnings growth in 2001.
SBC’s key growth platforms are performing well: SBC continues to experience strong growth in data services; the company’s Southwestern Bell Long Distance unit has reached the 2 million lines milestone in Texas, up from 1.7 million at year-end 2000, and the company will launch long-distance services in Kansas and Oklahoma next week; and Cingular, SBC’s nationwide wireless joint venture, in February passed the 20 million total subscriber mark, up from 19.7 million subscribers at the end of 2000.
SBC expects 2001 revenue growth to be driven by solid core wireline operations, continued strong data growth, contributions from Cingular, and expansion of the company’s long-distance business.
The company said it expects its expense profile in 2001 will be strengthened by factors including improved DSL economics, Ameritech merger synergies, network efficiencies, Ameritech service improvements and a more measured national expansion effort.
