AT&T posts $1.7 billion loss

(Telephony) AT&T closed the books on 2000 with another disappointing quarter, as the company reported a net loss of $1.7 billion and a 51% decline in operating income. The company also forecast more of the same for the first quarter of 2001, predicting further declines in its consumer business and flat revenue growth in its business segment.

Charges related to AT&T’s 24% interest in Excite@Home took a big bite out of the IXC’s income and forced a net loss of 45¢ per share. Excite@Home recorded $4.6 billion in asset write-offs for the fourth quarter, causing AT&T to take a $1.1 billion, or 29¢ per share, non-cash charge for its portion. AT&T also recorded a $1.6 billion charge for the impairment of goodwill associated with the investment in Excite@Home.

Excluding the charges, AT&T’s operating earnings declined 51% to $978 million, or 26¢ a share, on revenues of $16.9 billion, a 3% increase from 1999. The results matched the reduced estimates of analysts surveyed by First Call/Thomson Financial.

"Two-thousand was a tough year for most of the communications industry, and it sure was for AT&T as well," said AT&T Chairman C. Michael Armstrong.

AT&T’s revenues for the fourth quarter rose 3% to $16.9 billion, up from $16.4 billion in 1999. The small increase was driven by a 39% increase in wireless revenue and an 11.8% increase in broadband revenue. The consumer and business units were a drag on growth, however, as consumer revenue fell 14.7% and business rose a paltry 0.7%.

AT&T said the decline in consumer revenues reflected ongoing competition in consumer long distance and the migration of customers to optional calling plans and prepaid card products. The entry of RBOCs into in-region long distance will contribute to further erosion in 2001, as the revenue percentage decline for consumer long distance is expected to be in the mid to high teens.

In the fourth quarter, the decline in long distance revenues from pricing pressures also hurt the results of AT&T’s business segment, Armstrong said, which is trying to shift to growth services such as data and IP as well as outsourcing. "If you separate the long distance decline from business services, we had almost 20% growth," he added.

On the positive side of the ledger, AT&T Wireless reported 39.1% revenue growth for the quarter. AT&T Broadband’s 11.8% boost to $2.5 billion in quarterly revenue was driven by the addition of 825,000 new broadband telephony, high-speed data and digital video customers during the quarter. AT&T added 210,000 cable telephony customers, averaging 3,100 truck rolls per day, and recorded 259,000 net subscriber adds for high-speed data services.

Due to AT&T’s pending breakup, the company said it could not provide full year targets on earnings, revenue and cashflow. In early March, AT&T plans to swap shares of AT&T for AT&T Wireless tracking shares, resulting in the retirement of an undetermined number of AT&T shares. That exchange could have a "substantial effect" on any full-year earnings per share estimates.

Excluding the impact of the AT&T Wireless exchange offer, AT&T said it expects first quarter earnings to be in the range of 4¢ to 7¢ per share. Revenue is expected to grow at a rate similar to the fourth quarter of 200.

In an update on its restructuring, AT&T said it expects the IPO of AT&T Broadband to occur in the fall, and the AT&T consumer tracking stock to be distributed to shareholders in the third quarter of 2001.