Tuesday, July 19, 2005

AT&T Reports Q2 Revenue of $6.8 billion, Continued Pricing Pressures

AT&T reported net income of $307 million, or earnings per diluted share of $0.38. Revenue was $6.8 billion, which included $5.2 billion from AT&T Business and $1.6 billion from AT&T Consumer. Consolidated revenue declined 11.5 percent versus the second quarter of 2004, primarily due to continued declines in long distance (LD) voice and data revenue.


Some highlights for AT&T Business:

  • Revenue was $5.2 billion, a decline of 8.1 percent from the prior-year second quarter, primarily driven by ongoing pricing pressure in traditional voice and data services. Revenue was positively impacted by strong year-over-year growth in IP&E services.


  • Long distance voice revenue decreased 12.8 percent from the prior-year second quarter. Growth rates were negatively affected by continued pricing pressure, partially offset by a slight increase in overall volumes, as growth in wholesale volumes more than offset the decline in retail volumes.


  • Local voice revenue declined 9.9 percent from the prior-year second quarter, reflecting declines in reciprocal compensation revenue, as well as lower payphone-related revenue as a result of the sale of the company's National Public Markets business. AT&T said the decline also reflects its "ongoing strategy of selectively approaching the small business market, placing a greater focus on profitability than overall market share." AT&T continued to see the impact of this strategic change as the number of local access lines declined.


  • Data revenue declined 10.2 percent from the prior-year second quarter as a result of pricing pressure and technology migration.
    # IP&E-services revenue grew 9.5 percent over the prior-year second quarter, reflecting AT&T's ongoing transformation to next-generation networking services such as Enhanced Virtual Private Network (E-VPN) and IP-enabled frame relay services, partially offset by declines in Managed Internet Access.


Some highlights for AT&T Consumer:

  • Revenue was $1.6 billion, a decline of 20.8 percent versus the prior-year second quarter, largely driven by a decline in standalone long distance revenue due to volume declines associated with competitive customer losses and the continued impact of wireless and Internet substitution, partially offset by targeted price increases. Decreased bundled revenue also contributed to the revenue decline.


  • Operating income totaled $489 million, yielding an operating margin of 30.7 percent, compared with operating income of $240 million and an operating margin of 11.9 percent in the prior-year second quarter. Current-quarter operating income was negatively impacted by net restructuring and other charges of $10 million and was positively impacted by a $35 million net benefit from lower depreciation as a result of asset-impairment charges taken during the third quarter of 2004.


  • The year-over-year increase in operating income and margin reflects a significant reduction in selling, general and administrative expenses, primarily attributable to the strategic decision to discontinue marketing for residential local and standalone long distance (LD) customers.


"AT&T's second quarter results demonstrate our continued focus on executing in the marketplace, managing costs, and strengthening our competitive position with enterprise customers," said AT&T Chairman and Chief Executive Officer David W. Dorman. "Given the overwhelming shareholder support we received for our merger with SBC, we look forward to securing all appropriate regulatory approvals and completing this transaction in a timely manner."http://www.att.com

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