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SBC's profit down 41%; DSL gains

Wed, 10/19/2005 - 8:00pm

Copyright 2005 MarketWatch.com Inc., All Rights Reserved

CBS MarketWatch

October 20, 2005 Thursday 9:35 AM

Jeffry Bartash, MarketWatch

From Lexis Nexis

WASHINGTON (MarketWatch) -- SBC Communications Inc. on Thursday said third-quarter profit fell nearly 41% compared to the year-ago quarter, when the company reaped a large onetime gain from the sale of several Yellow Pages operations.

Excluding one-time costs and benefits, SBC said profit from operations rose 25% as the company added a record number of high-speed Internet customers and made further gains from its wireless business.

On a net basis, the company said earnings fell to $1.25 billion, or 38 cents a share, from $2.09 billion, or 63 cents, a year earlier. Revenue rose 0.3% to $10.32 billion, excluding the company's interest in Cingular Wireless.

After factoring out special items, SBC said earnings climbed to $1.5 billion, or 47 cents a share, from $1.2 billion, or 38 cents a share, a year earlier. The company was expected to earn 41 cents a share, according to the estimate of Thomson First Call.

In the year-ago quarter, SBC incurred a one-time benefit of 25 cents a share from the sale of Yellow Pages operations in Illinois and Indiana.

In early Thursday trades, shares of SBC (SBC) rose as much as 2%.

DSL and wireless
SBC added a record 528,000 high-speed Internet users, a quarterly record, to end the period with more than 6.5 million DSL accounts. The company has more DSL subscribers than any other phone carrier, and trails only the cable giant Comcast for the market lead.

The company's wireless venture, Cingular Wireless, reported strong results on Wednesday. Cingular recorded a 56% increase in net income, as it added nearly 900,000 customers and further reduced costs.

SBC and BellSouth Corp. (BLS), for instance, co-own Cingular Wireless, the nation's leading supplier of wireless-phone service with more than 52 million customers.

Growth in wireless and high-speed Internet access more than offset further erosion in SBC's traditional local-phone business.

While SBC and other big phone companies have been losing local customers to wireless, Internet-phone and cable-telephony services, they've recaptured some of that lost revenue by adding subscribers to their own high-speed service or wireless networks.

Indeed, wireless has become the fastest-growing part of the telecom business, and has proven to be a lifeline for the big phone companies.

Yet Cingular's net subscriber additions fell below the 1 million mark for the first time in four quarters -- a potential sign that the wireless market is starting to slow after several years of explosive growth.

AT&T merger
In the future, SBC hopes to leverage its pending $16 billion acquisition of AT&T Corp. to sign up more corporate customers and to package its landline phone service with Cingular's wireless plans.

Sales at AT&T have been declining for years, however, on stiffer competition, lower prices and the move by some customers to alternative technologies. Some analysts question whether SBC can reverse the decline at AT&T.

For its part, AT&T posts results on Friday. The company is seen earning 51 cents a share on revenue of $6.56 billion.

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