Wednesday, January 19, 2005

AT&T Profit Rises, Revenue Falls in Challenging Market

AT&T reported Q4 consolidated revenue of $7.3 billion, which included $5.5 billion from AT&T Business and $1.8 billion from AT&T Consumer. Consolidated revenue declined 10.2% versus the fourth quarter of 2003, primarily due to continued declines in long-distance (LD) voice and data revenue, partially offset by an increase in bundled services revenue and solid growth in key services in the enterprise market, such as Internet Protocol & Enhanced services (IP&E-services).



Net income was $625 million, or earnings per diluted share of $0.78, for the fourth quarter of 2004. The company's current quarter net income included an after-tax depreciation benefit from its third-quarter 2004 asset impairment charges of $337 million, or $0.42 per diluted share. The company's current-quarter net income compares to net income of $340 million, or earnings per diluted share of $0.43, in the fourth quarter of 2003.



"While the pricing environment in our industry remains challenging, we're encouraged by the strengthening of AT&T's competitive position in the enterprise market in recent quarters," said AT&T Chairman and Chief Executive Officer David W. Dorman. He said he is not ready to call a bottom to the market, although he remains cautiously optimistic that pricing pressure in the company's core business is stabilizing.



Dorman said further job cuts at AT&T were likely, especially in customer care centers as its Consumer LD business continues to decline. He said AT&T plans to further enhance its CallVantage consumer VoIP service while extending the platform for SMBs. AT&T also plans to launch an enterprise wireless offering soon. With the Cingular/AT&T Wireless merger complete, AT&T now plans to reclaim its brand for wireless services.



Some highlights:

  • For the full year, AT&T reported a net loss of $6.1 billion, or loss per diluted share of $7.68.


  • AT&T reported full-year 2004 consolidated revenue of $30.5 billion, which included $22.6 billion from AT&T Business and $7.9 billion from AT&T Consumer. This represents a consolidated revenue decline of 11.6% versus 2003.


AT&T Business

  • Revenue was $5.5 billion, a decline of 7.4% from the prior-year fourth quarter. Pricing pressure and continued declines in retail volumes negatively affected revenue performance. Partially offsetting these declines was a reciprocal compensation settlement as well as strength in IP&E-services. Full-year revenue declined by 9.9% to $22.6 billion.


  • Long-distance voice revenue decreased 13.5% from the prior-year fourth quarter, driven by continued pricing pressure in both the retail and wholesale businesses, as well as a continued decline in retail volumes. Total volumes were down slightly versus the prior-year fourth quarter. Full-year LD voice revenue declined 15.0% compared to 2003, while volumes were essentially flat.


  • Local voice revenue grew 26.6% for the fourth quarter and 12.7% for the full year versus the same prior-year periods. Revenue was positively impacted by a reciprocal compensation settlement that increased revenue by approximately $97 million. Local access lines totaled nearly 4.7 million at the end of the current period, representing an increase of approximately 11,000 lines compared with the third quarter of 2004.


  • Data revenue declined 13.7% from the prior-year fourth quarter. Revenue was negatively affected by pricing pressure and technology migration. On a full-year basis, data revenue decreased by 12.2% from the prior year.


  • IP&E-services revenue grew 13.0% over the prior-year fourth quarter. The year-over-year growth was primarily driven by strength in Enhanced Virtual Private Network and IP-enabled frame. Full-year revenue grew by 11.0% over the prior year.


  • Outsourcing, professional services and other revenue declined 3.1% from the prior-year fourth quarter due to terminating outsourcing contracts and customers reducing scope, partially offset by strength in equipment sales. Full-year revenue declined by 11.6% from the prior year.


AT&T Consumer

  • Revenue was $1.8 billion for the fourth quarter of 2004 and $7.9 billion for the full year, representing declines of 17.9% and 15.9 percent, respectively, versus the same prior-year periods.


  • At the end of the fourth quarter, AT&T Consumer had over 24 million standalone LD and bundled customers.


2005 OUTLOOK

  • Consolidated revenue between $25 billion and $26 billion


  • Year-over-year decline of several hundred million dollars in small business revenue, primarily reflected within AT&T Business local voice, as a result of changes in the regulatory environment


  • Consolidated operating income margin in the low double-digits, excluding any net restructuring and other charges


  • Total capital expenditures of approximately $1.5 billion
http://www.att.com

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