• United States
Editor in Chief

WAN carriers rock and teeter

Feb 10, 20033 mins

Just when you thought the long-distance telecom sector would settle down a bit, things have started to wobble again. Let’s review.

Just when you thought the long-distance telecom sector would settle down a bit, things have started to wobble again. Let’s review:

• Even as Sprint trotted out enviable 2002 results – revenue up 4% to $26.6 billion and a profit of $388 million – the company was rocked by news that Chairman and CEO William Esrey and President Ronald LeMay were being forced out because of personal tax shenanigans.

• Company documents reveal that WorldCom sales have dropped more precipitously than the company has let on. According to The New York Times, which obtained and verified the documents, new business sales to business and government dropped from $551 million in the second quarter last year to $139 million by the fourth (see this site).

• AT&T finished 2002 with revenue down 10.4% to $37.8 billion and a loss of $13 billion, the latter primarily stemming from one-time charges from overseas investments, costs associated with layoffs and restructuring charges.

You can get a good sense of the market by more closely examining the biggest fish – AT&T. And it isn’t pretty.

AT&T now consists of two units, AT&T Business and AT&T Consumer, having spun off AT&T Wireless in July 2001, and completing the sale of AT&T Broadband to Comcast last November.

Most of the company’s current pain stems from the consumer business. During the past five years AT&T has seen an astounding $11 billion worth of consumer long-distance revenue evaporate. The consumer business today is half of the $22.8 billion reported in 1998. Revenue this year was down a whopping 22.3%.

Like other carriers, AT&T attributes the fall in consumer sales to price competition, the rise of wireless and even the use of e-mail.

While the business side is more stable, it too is on the decline. AT&T Business saw revenue drop 4% last year to $26.6 billion. Long-distance voice revenue fell 10% in the fourth quarter, and local voice revenue increased more than 25%. But on a positive note, data, IP and managed services grew about 3% in the quarter.

Looking out to the rest of 2003, AT&T says it doesn’t anticipate a significant turnaround in business services. Even though it is capturing market share – presumably at the expense of WorldCom – the company expects total telecom spending to trail down again this year.

Couple that with the fact that local exchange carriers often capture 30% of the long-distance markets they enter, and the future doesn’t look bright.