SBC to cut “several thousand” jobs

SBC Communications will respond to the continuing economic slump by cutting “several thousand” jobs in the coming months and slashing its capital expenditures by 20% in 2002, the RBOC said in its lackluster third-quarter earning report today.

Most of the cuts will come from a slowdown of “Project Pronto,” the development SBC’s high-speed Internet access network. SBC is completing the rollout of Project Pronto in Tier 1 cities but will “take a hard look before we go any further,” said Randal Stephenson, chief financial officer of SBC. Stephenson said SBC will pare back its foray into Tier 2 cities and may reduce its addressable market by 10%.

SBC originally intended to spend about $12 billion on capital expenditures next year.

Edward E. Whitacre Jr., SBC’s chairman and CEO, blamed federal and state regulators for some of SBC’s problems.

“We are dealing than more with a shrinking economy. We also have to contend with an adverse and uncertain regulatory environment,” said Whitacre said. “Pervasive regulation artificially drives up our cost--it affects how we invest our capital, how we market our products and services, and how we compete against unregulated companies.”

In particular, Whitacre cited rules regarding the carrier’s DSL efforts that let competitors to ride its lines for below cost, adding “hundreds of millions of dollars” to SBC expenses.

“Our DSL services are burdened with regulations that our cable-modem competitors do not face,” Whitacre said.

Because Congress is considering tacking additional rules onto DSL and other advanced services, “no responsible company could justify fully deploying broadband capabilities and invest in new, advanced networks in the face of this uncertain environment,” Whitacre said.

SBC plans to hit its earnings per share target of $2.35 for 2002, but Whitacre said the continuing downturn would make it “difficult to get any meaningful momentum on the top line.”

For the third quarter, SBC’s operating earnings increased 3.5% to 59¢ a share, or $2.0 billion, compared with 57¢ a share, or $1.96 billion, in last year’s third quarter.

Including a one-time, $73 million pension-settlement gain, SBC recorded net income for the third quarter of $2.1 billion, or 61¢ a diluted share, compared with $3.0 billion, or 88¢ per share, in 2000.

Including proportionate sales from the Cingular Wireless joint venture with BellSouth, SBC’s quarterly revenue increased 0.8% to %13.5 billion. Data revenue growth was only about 10% and was dampened by SBC de-emphasizing low-margin customer premises equipment as a component in data solutions, SBC’s executives said. Excluding CPE sales, data revenues grew 15%.

The carrier added 150,000 digital subscriber lines during the quarter, up from the 117,000 added a year ago and the 83,000 added in the second second quarter. SBC ended the quarter with 1.2 million DSLs.

SBC now has 4.6 million long distance lines--double the number it had a year ago--in the four states where it has won 271 approval: Texas, Connecticut, Kansas and Oklahoma. FCC decisions on Missouri and Arkansas are expected next month.