BellSouth breaks even for Q3, eliminates 3000 jobs

BellSouth reported net income (including one-time charges) of $7 million--essentially break-even on a per share basis and a 99% decline year over year--for the third quarter 2001 on total operating revenues of $7.45 billion.

Without the one-time charges, the company posted net income of $1.06 billion, or 56¢ per diluted share, up a penny compared to third quarter 2000. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter were $3.37 billion, a 4.2% increase year over year.

The 54¢ charge resulted from “the impairment of certain strategic investments” in publicly traded and private equity securities, principally BellSouth’s investment in Qwest Communications.

Vice President of Investor Relations Nancy Humphries said BellSouth is feeling the effects of a softening economy. In addition, heightened competition from competitive carriers has resulted in a net loss of 320,000 retail access lines since the beginning of the year.

Consequently, BellSouth also announced it would eliminate 3000 positions and redeploy others to the company’s growth areas: data, broadband and wireless.

Data revenues grew 28% for the quarter and exceeded $1 billion for the third consecutive quarter.

“BellSouth has historically had the highest percentage of network data revenues, compared to total revenues, than all of our RBOC peers,” Chief Financial Officer Ron Dykes said.

Meanwhile, digital subscriber line customers increased to 463,000 during the quarter, up 22% sequentially. However, looking ahead to the fourth quarter, Dykes said he anticipated a “dampening” to occur compared to fourth quarter 2000, when BellSouth’s DSL sales benefited from tie-ins with several personal computer makers and strong PC sales during the holiday season.

“We’ll deal with it,” he said, adding that he still is expecting a strong fourth quarter this year. “We remain focused on reaching our goal of 600,000 customers by year end.”

BellSouth reported domestic wireless revenues of $1.5 billion for the quarter, a 38.1% increase year over year. Cingular Wireless, the joint venture between SBC Communications and BellSouth, saw its revenues increase 13.6% for the quarter.

The company expects normalized earnings per share for fiscal 2001 to range between $2.22 and $2.27, down slightly from the $2.25 to $2.27 guidance provided previously. Dykes attributed this to the 3¢ per share foreign exchange loss the company incurred in the third quarter, which “relates to how we financed our Latin America businesses.”

The company expects total operating revenue--including revenue from Cingular--to grow between 8% and 9%, and capital expenditures (CAPEX) to decrease to a range between $5.5 billion and $6.0 billion, a 12.5% to 23% reduction from the $6.75 billion spent in 2000. Dykes indicated CAPEX spending in the third quarter was down 18% year over year, and 18% sequentially.

“All of that was accomplished despite ramping up our data and DSL initiatives,” Dykes said.