SBC hammered on customer woes

Investors Tuesday dumped the stock of Bell giant SBC Communications after the company admitted delays in ramping up DSL remote-terminal service and obtaining long-distance approvals.

SBC also cited a recent customer-service crisis in its Ameritech region in lowering earnings estimates to the lower end of the range it had previously outlined for Wall Street.

With 1 hour left in Tuesday's trading, SBC was down $6.69 a share to $46.62. The move affected the Dow Jones Industrial Average given that SBC was recently added to the index. SBC's fall held the Dow Jones' daily gain to about 35 points at 3 p.m.

In a briefing for investors, available in Adobe Acrobat format here, SBC acknowledged that its DSL upgrade plans have suffered "a late start" in the Ameritech states.

SBC recently confirmed that more than a year following announcement of its corporatewide Project Pronto DSL upgrade program, it is seeking DSL remote-terminal space from its own customers in the Ameritech territory to extend DSL-capable loop lengths (SBC starving for DSL network space).

SBC also linked the Ameritech DSL delays to a general backlog in Ameritech installation work, which led SBC CEO Ed Whitacre in October to travel to Chicago to promise to do better. Throughout the fall, state and federal regulators slapped SBC with warnings about weeks-long delays for installation and repair of even regular analog telephone lines, while Midwest customers complained of chronic confusion in Ameritech customer-service operations (SBC getting poor grades).

"Service upgrades for customers in the Ameritech region, launched in September of this year, continue to be a top priority for SBC," today's SBC investor briefing says. "The company's commitment to finalizing these upgrades has contributed to SBC's decision to adopt a measured approach to DSL deployment in the Ameritech region over the next several months."

SBC also said it has suffered delays getting long-distance approval for California and the Ameritech states, which affects the revenue it has been expecting to receive in upcoming quarters. In at least one case, a state regulator - Illinois Commerce Commission Chairman Richard Mathias - has bluntly told SBC to forget about applying for long-distance in his state until local service problems are cleared up.

SBC does have long-distance authority for two of its states - Texas and Connecticut. It also has long-distance applications now pending before the Federal Communications Commission for Kansas and Oklahoma. The FCC is due to rule on the Kansas and Oklahoma bids next month.

SBC says it now expects revenue growth over the next year of 8% to 9% and earnings per share growth of 11% to 14%. It previously projected revenue growth possibly reaching into double digits and earnings growth comfortably into the midteens.

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