SBC Reports 3Q Earnings Decline - InformationWeek

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SBC Reports 3Q Earnings Decline

It blamed the 29% drop on the loss of customers to rivals who are allowed to lease its local phone lines.

SAN ANTONIO (AP) -- SBC Communications Inc. on Tuesday reported a 29 percent drop in third-quarter earnings, blaming the disappointing results on the loss of more customers to rivals who are allowed by regulators to lease SBC's local phone lines.

But San Antonio-based SBC also said last week's regulatory approvals allowing the company to sell long distance in more states have opened the door to good growth opportunities. The company also plans to accelerate job cuts in the coming quarters to further reduce operating costs.

SBC, the nation's No. 2 local-phone company, had income of $1.22 billion in the three months ended Sept. 30, down from $1.71 billion in the same period a year earlier.

The profit worked out to 37 cents per share, compared with 51 cents in the third quarter of 2002.

The per-share earnings fell short of analyst forecasts of about 39 cents, according to a survey by Thomson First Call.

Revenue for the most recent quarter totaled $10.24 billion, compared with $10.56 billion in the year-ago period. The revenue figures do not include proportionate results from Cingular Wireless, a mobile phone partnership with BellSouth that is 60 percent owned by SBC.

SBC said it continued to lose local phone customers, but made up some of those losses by building up its high-speed Internet and long-distance subscriber bases.

Randall Stephenson, chief financial officer, said during a conference call with analysts that SBC has eliminated about 4,600 jobs in its non-sales divisions this year, while boosting its sales force by about 1,200.

He said the job losses have mostly come through attrition, and that SBC plans to accelerate those reductions in the fourth quarter and into 2004. Since late 2001, SBC has cut some 20,000 positions, more than 15 percent of its employee force.

SBC reported adding 1.7 million long-distance customers in the quarter and 365,000 customers for high-speed DSL Internet service.

In addition, Cingular added 745,000 subscribers in the period, up 38 percent from the second quarter of 2003, the company said.

On the New York Stock Exchange, SBC shares were down 40 cents to close at $22.00.

SBC said its clearance to begin selling long-distance service in Illinois, Ohio, Indiana, and Wisconsin will enable it to compete more effectively against rivals such as AT&T and MCI, which already offer both local and long-distance service in those states.

Although SBC remains the predominant local-service company in the Midwest, the company has suffered sizable losses among customers who prefer to buy bundled services from a single phone carrier.

Stephenson said the approvals would enhance SBC's efforts to sell local and long distance with wireless and DSL broadband services like it already does in other states.

"Where we have long distance, growth is stronger," he said.

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