Sunday, July 24, 2005

BellSouth Sees Slower DSL Growth and Continued Decline in Wireline Access

BellSouth reported Q2 revenue of $8.52 billion, up 2.6% compared to Q1 2005. Q2 earnings per share (EPS) from continuing operations were 43 cents compared to 37 cents in the first quarter of 2005 and 51 cents in the second quarter of 2004. Some highlights of the report:

  • BellSouth's Communications Group revenue in Q2 remained stable at $4.62 billion, a slight increase compared to the same quarter of 2004. Revenue growth from long distance, DSL and small business access line gains effectively offset revenue declines from residential access line loss and large business services.

  • During Q2, BellSouth added 124,000 net DSL customers, down from 253,000 DSL net customer additions in Q1. BellSouth attributed the slower growth to changes in promotional activity during the first quarter and traditional slowing in Q2. BellSouth now has a total of 2.4 million DSL subscribers.

  • Driven by DSL, network data revenue for the second quarter was $1.17 billion, an increase of 4.5 percent compared to the same quarter of 2004.

  • As of June 30, 2005, total access lines were 20.8 million, down 419,000 compared to Q1 2005. The company said the access line loss was driven by wireless substitution, competition and seasonal household moves that traditionally affect Q2.

  • UNE-P access lines resold by BellSouth competitors were down 235,000 compared to the first quarter of 2005. Residential retail access lines were down 204,000. In contrast, business retail access lines held steady, boosted by 33,000 net new access lines in the small business segment.

  • BellSouth long distance customers reached 53 percent penetration of its mass-market customer base. With many residential and small business customers choosing unlimited long distance and international calling plans, ARPU is about $17 per month.

  • An additional 80,000 customers added DIRECTV service to their communications packages during the second quarter, bringing the total number of customers with this package to 394,000.

  • Operating margin was 19.2 percent, a 190 basis point improvement compared to Q12005.

  • Operating free cash flow (defined as net cash provided by operating activities less capital expenditures) was $1.3 billion for the second quarter of 2005.

"The realignment of our assets toward wireless and broadband services is starting to pay off," said Duane Ackerman, BellSouth's Chairman and Chief Executive Officer.

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