Oct 25, 2005 11:19 AM,

BellSouth's Q3 affected by Katrina

By Dan O'Shea

BellSouth chairman and CEO Duane Ackerman acknowledged in the company's third-quarter earnings report that damage and restoration costs related to Hurricane Katrina, combined with ongoing merger integration costs, will give BellSouth relatively flat earnings for the quarter, compared to previous reports.

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The telco giant, which earlier had said Katrina-related costs would amount to between $400 million and $600 million, said it is continuing to assess damage related to that Hurricane and that its cost estimates are still subject to uncertain factors, such as reconstruction costs and information the company needs to obtain from New Orleans city administrators. In the third-quarter results, the company reported $200 million in hurricane damage costs, and an additional $63 million in billing credits related to the hurricane.

Ackerman lauded the response his company and employees had to Hurricane Katrina. "Our employees demonstrated tremendous commitment to serve our customers. At the same time, we maintained focus on the key growth areas of our business, delivering solid revenue performance and continued customer growth from broadband and wireless services."

Overall, BellSouth announced normalized third-quarter earnings per share of 46 cents, flat compared to the third quarter of 2004, and 3 cents per share lower than the 43 cents EPS reported in the second quarter of this year. The normalizing items not only included hurrcane costs, but also ongoing costs related to Cingular Wireless' acquisition of AT&T Wireless, as well as a gain of $625 million from the sale of BellSouth's holdings in Israeli mobile operator CellCom.

Normalized revenue for the quarter came in at $8.49 billion, down slightly from the previous quarter but up from $6.76 billion in the third quarter of 2004. Normalized net income was $845 million, a $48 million decrease compared to the same quarter of the previous year due to a decline in earnings from the Communications Group and financing costs associated with the AT&T Wireless deal.