Telecom Carriers Report Strong Second Quarters - InformationWeek

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Telecom Carriers Report Strong Second Quarters

Three of the nation's largest telecommunications companies posted strong second-quarter revenues and net income, largely because of booming demand for wireless and Internet-related services.

AT&T Corp., the nation's largest phone company, said earnings from continuing operations rose to $1.59 billion, or 49 cents per diluted share, from $1.47 billion, or 54 cents per share, a year ago. Per-share profit fell because the company's shares outstanding rose after its March acquisition of cable giant Tele-Communications Inc.

AT&T's total pro forma revenues for the quarter were $15.82 billion, an increase of 6.7% from $14.82 billion for the second quarter of 1998, including revenues from TCI and the Global Network business AT&T acquired from IBM Corp. While AT&T's revenues from wireless services skyrocketed 42.4% in the second quarter, revenues from its traditional consumer long-distance telephone business declined 3.4% to $5.5 billion from $5.7 billion in the 1998 period.

Meanwhile, recently merged rival MCI WorldCom Inc. said net income tripled in the second quarter to $857 million, or 44 cents per share, from a pro forma $287 million, or 16 cents per share, in the same period of 1998. MCI WorldCom attributed the increase in net income to the sale of higher-margin services and cost-savings from the merger of MCI and WorldCom.

"The company continues to execute on or ahead of plan with respect to merger synergies and the diversification of revenues," says Bernard J. Ebbers, president and CEO of MCI WorldCom. "Our communications services revenue growth is being driven by continued strong top-line performance in data, Internet, and international--three of the fastest growing and most profitable areas within communications services."

MCI WorldCom's total revenue rose 16% to $8.14 billion from $7 billion in last year's second quarter on a pro forma basis. Revenue from data traffic rose 29% to $1.8 billion, while Internet-related revenue surged 59% to $836 million from $525 million.

Qwest Communications, the fourth-largest telecommunications company in the nation, which has agreed to buy regional Bell company U S West Inc., posted a 26% increase in second-quarter revenues and earnings that exceeded analysts' expectations. Qwest said revenues rose on a pro forma basis to $873.7 million from $695.3 million in the same period a year before. Net income on a pro forma basis rose to $18.5 million, vs. a loss of $27 million in the same period in 1998. Internet and data services revenue grew about 40%, and now account for more than 20% of Qwest's communications services revenue.

In the second quarter, Qwest completed construction of 18,500 miles of its U.S. fiber-optic network and secured $805 million in financing to build a similar network in Europe.

"Qwest is still spending money on building its national network, so they're not going to see huge money in the near term," says Philip Wohl, a telecom analyst at Standard & Poors "What counts is that their revenues have been very good. It's just not flowing to the bottom line yet."

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