BEDMINTER, N.J., Oct. 22 (UPI) -- Long-distance telephone and cable television giant AT&T Corp. posted lower third-quarter net income amid weak demand for telephone and data services in the turbulent economy.
AT&T, which plans to sell its cable television business to Comcast Corp., said its third-quarter net income fell to $207 million, or 5 cents a share, from $11.3 billion, or $3.13 a share during the same period last year.
AT&T said its latest results reflects other income due to taxes associated with the impairment charges recorded on certain leveraged leases of aircraft. Excluding the charges, AT&T posted a net income of 6 cents a share.
Last year's results included losses of 95 cents a share related to equity investments and other income of 28 cents a share. Excluding the items, the loss from continuing operations was 2 cents a share.
Analysts on Wall Street had expected AT&T to report a net income of 5 cents a share, according to Thomson First Call.
Revenues fell 8.3 percent to $12 billion from $13 billion a year ago.
The telecommunications company attributed the lower revenue to continued declines in long-distance voice services, partially offset by growth at AT&T Broadband in telephony, high-speed data and digital video, and growth areas of AT&T Business.
C. Michael Armstrong, chairman and chief executive officer, said, "We had a good third quarter and posted solid results as we remained focused on executing the operational basics of our business.
"Following the spin-off of AT&T Broadband and its merger with Comcast, AT&T will be well positioned for the future with a top-notch leadership team, a world-class network, a sound financial structure and a wealth of opportunity in the marketplace," Armstrong said.
Following the anticipated spin-off of AT&T Broadband later this quarter, the primary business of AT&T will be communications services, provided by the AT&T Business and AT&T Consumer units.
"Our communications services units made a solid showing in the quarter, reflecting our focus on the fundamentals of operating strong voice and data businesses and seizing growth opportunities," said David Dorman, AT&T chairman and chief executive officer-elect.
"AT&T Business rededicated itself to executing in the marketplace and meeting customer needs across its product portfolio, and AT&T Consumer accelerated its local service momentum, entering two more states and increasing its 'any distance' customer count by 24 percent over the previous quarter," Dorman added.
The company said AT&T Business recorded third-quarter revenue of $6.7 billion, down 1.6 percent. EBIT, excluding other income, was $876 million, while EBIT margin on the same basis fell to 13.1 percent from 14.5 percent. EBIT reflects earnings before interest, taxes, extraordinary item, cumulative effect of accounting changes, dividend requirements on preferred stock, premium on exchange of AT&T Wireless tracking stock and discontinued operations.
AT&T Business expects its full-year forecast to meet or slightly beat prior expectations for a revenue decrease of 4.5 percent to 5 percent and an EBIT margin decline of 2 percentage points to 3 percentage points from last year's 13.3 percent.
During the third quarter, the long-distance voice revenue decline slowed to about 8 percent.
AT&T Consumer experienced a 25.9-percent decline in third-quarter revenue to $2.79 billion on continued trends of wireless and Internet substitution, competition, and customer migration to lower priced plans and products. EBIT was $595 million excluding other income, while EBIT margin on the same basis dropped to 21.3 percent from 33.9 percent.
Within the consumer segment, AT&T maintained its full-year 2002 forecast for revenue at the favorable end of a mid-20 percent range decline and an EBIT margin with a high-single-digit percentage decline.
AT&T Communications Services, which primarily includes AT&T Business Services and AT&T Consumer Services, isn't providing a fourth-quarter earnings-per-share outlook because of the expected AT&T Broadband spin-off and reverse split. However, the company does expect capital expenditures to be at the low end of the $3.8 billion to $4.2 billion range.
Last week, AT&T said it expected to complete the spin-off of the broadband unit to Comcast Corp. by the end of the year. AT&T shareholders approved a 1-for-5 reverse split in July.
AT&T's broadband segment had third-quarter revenue of $2.5 billion, up 6.4 percent on a reported basis and 8.2 percent on a pro forma basis.
EBITDA was $569 million, or $676 million excluding other income and Comcast merged-related costs. EBITDA margin was 22.3 percent, or 26.5 percent excluding other factors. EBITDA refers to EBIT, excluding depreciation and amortization, and pretax minority interest other than Excite-at-Home's minority interest.
During the third quarter, AT&T Broadband basic video subscribers declined about 129,000, primarily because of competition. This is greater than the second-quarter decrease of 125,000 subscribers, thereby missing the July 23 projection for a lower loss of basic video subscribers in the third quarter from the second quarter.
For full-year 2002, AT&T Broadband still expects revenue growth in the low-double-digit percentage range and EBITDA, excluding other income, of $2.4 billion to $2.5 billion.
