AT&T sees Q3 net income rise, revenue fall

AT&T Tuesday reported an increase in third-quarter net income but saw sales drop due to continued weak customer demand and long-distance service pricing pressures.

AT&T Tuesday reported an increase in third-quarter net income but saw sales drop due to continued weak customer demand and long-distance service pricing pressures.

Net income was $418 million in the third quarter, which ended Sept. 30, or 53 cents per share, compared with $207 million, or 26 cents per share, for the same period a year ago, the U.S. long-distance telephone company said in a statement. The year-earlier figure was brought down by charges for discontinued operations.

The company’s effort to “relentlessly reduce costs” lead to the higher income, said Thomas Horton, chief financial officer. AT&T is nearly finished with its goal to cut its workforce from about 71,000 to 65,000 in 2003, company officials said, and those cuts will save about $650 million in 2004.

The company is also focused on increasing labor efficiencies and improving operating efficiencies, Horton said during a press conference Tuesday. “By continuing to focus on the things we can control, we’re positioning AT&T for long-term leadership and success,” he said.

Third-quarter operating income – including revenue from core businesses but excluding related expenses – dropped to $829 million from $1.4 billion for the same period a year earlier.

The 53 cents earnings per share figure met analysts expectations, as reported by Thomson First Call.

Total revenue in the third quarter was $8.6 billion, compared with $9.4 billion a year earlier.

Long-distance voice revenue, AT&T’s core business, dropped 10.5% on a quarter-over-quarter basis, driven by continued pricing pressure, the company said.

AT&T had a “solid” quarter despite stiff competition in the telecommunications industry, said Dave Dorman, the company’s chairman and chief executive officer.

“While the impact of a weak economy, pricing pressures, increased competition and technological substitution are effecting current sector performance, AT&T continues to operate from a position of industry leadership and strength,” Dorman said. “We believe AT&T is positioned as a significant beneficiary of the eventual economic recovering filtering through to the telecom market, though there is still much more work to be done.”

AT&T isn’t seeing an increase in demand for telecom services from its business customers, Dorman said, and pricing competition between carriers is increasing. An over-saturation of telecom carriers needs to be resolved, he added.

In response, AT&T is positioning itself as a bundled provider of telecom services, including wireless and broadband services, Dorman said. “While the challenges facing our business and consumer segments are real, we’re rising above those challenges by executing in the marketplace,” he added.