AT&T rings up $3.5b profit

AT&T Inc, the biggest US phone company, said first-quarter profit rose 22 percent on sales of mobile handsets such as the iPhone and savings from the $86 billion purchase of BellSouth Corp.

Net income jumped to $3.46 billion, or 57 cents a share, from $2.85 billion, or 45 cents, a year earlier, the San Antonio-based company said yesterday in a Business Wire statement. Sales climbed 6.1 percent to $30.7 billion, meeting the average estimate in a Bloomberg survey of analysts.

Customers are dropping home-phone lines to switch to cable providers' voice plans, and signs are building that businesses may cut spending, forcing Chief Executive Officer Randall Stephenson to look to wireless sales for growth. AT&T, the exclusive US carrier for Apple Inc's iPhone since it went on sale in June, cut the handset's price in September.

"The iPhone continues to do fairly well," said Christopher King, an analyst at Stifel Nicolaus & Co in Baltimore. "What we're hearing is that ever since AT&T and Apple cut the price, every single week they've been taking market share from Verizon." King advises holding on to the shares.

Profit was 74 cents a share, excluding costs such as acquisition expenses, meeting the 74-cent average estimate of 22 analysts in a Bloomberg survey.

AT&T rose 8 cents to $37.59 on Monday in New York Stock Exchange composite trading. The shares had declined 9.6 percent this year before yesterday. Their 7.8 percent drop in the first quarter was the biggest since 2005. Twenty-two analysts suggest buying the stock, six recommend holding it and one says to sell it, according to data compiled by Bloomberg.

Stephenson is using the BellSouth purchase, completed in 2006, to cut 10,000 jobs in overlapping functions such as marketing and technology. The company announced 4,650 additional firings April 18 to reduce the number of middle managers in the home-phone business, incurring a $374 million pretax charge in the first quarter.

The acquisition expanded AT&T's home-phone territory to 22 states and gave it full control of the wireless unit it co-owned with BellSouth.

Sales to corporate customers, excluding revenue from an equipment business, expanded in the second half of 2007 for the first time since the 2005 merger that created the current AT&T.

Agencies

(China Daily 04/23/2008 page17)