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AT&T sees slower growth in 2000

by Larry Dignan, ZDII03 May 2000 - AT&T Corp. said Tuesday that revenue and earningsgrowth will be down from previous guidance for fiscal 2000 as long-distance sales decline at a faster rate.
Written by Larry Dignan, Contributor

by Larry Dignan, ZDII

03 May 2000 - AT&T Corp. said Tuesday that revenue and earnings growth will be down from previous guidance for fiscal 2000 as long-distance sales decline at a faster rate.

The company also said its first-quarter operating profits fell 13.1 percent, meeting Wall Street expectations.

On a conference call with analysts, CEO C. Michael Armstrong said lagging long-distance revenue would hurt the sales outlook for the year. Armstrong, who had projected a 3 to 5 percent fall in long-distance revenue, said the decline will probably be 5 to 7 percent.

Long-distance revenue could decline because of new calling charge initiatives proposed by AT&T and others. The changes are expected to take effect in July.

Armstrong said long-distance revenue was declining at a faster pace as customers transitioned to new technology (from calling cards to wireless) and migrated to new calling plans. The company is also "losing share with low-value customers."

Because of the long-distance sales decline, AT&T is likely to grow sales at a 7 to 8 percent rate for fiscal 2000. Sales growth of 6 to 7 percent is possible because of changes in calling charges. The changes will cut some of AT&T's fees.

Armstrong had projected fiscal 2000 revenue growth of 8 to 9 percent. The AT&T chief also said business sales were off to a slower-than-expected start. Business sales will grow about 8 percent in fiscal 2000, down from guidance of 11 percent.

Armstrong said fiscal 2000 operating earnings will be in the $1.87 to $1.92 a share range. Current First Call Corp. estimates project earnings of $2.08 a share in 2000, but may not include dilution from recent deals. Armstrong said AT&T projected annual earnings of $2.10 to $2.15 without dilution and $1.89 to $1.99 including dilution.

First quarter in line with estimates

AT&T reported first-quarter operating earnings of $1.73 billion, or 53 cents a share, on sales of $15.8 billion. The earnings were down from a year ago but in line with Wall Street estimates.

Earnings tracking firm First Call Corp. predicted a profit of 53 cents a share.

AT&T's operating earnings exclude gains, charges and other ownership interests. Including those items, AT&T reported earnings of $1.74 billion, or 54 cents a share. The results were down from earnings of $1.72 billion, or 61 cents a share, a year ago. The company said the earnings were lower because of the acquisition of cable company TCI and a higher shares outstanding count.

Revenue for the quarter ending March 31 was up 5.8 percent to $15.8 billion, compared with $14.97 billion a year ago.

It was a standard quarter for AT&T -- good growth in business services, wireless and broadband was offset by fierce competition in the consumer long-distance market.

New businesses gain

The company said wireless revenue, tracked by Ma Bell's AT&T Wireless stock, was up 40 percent. In AT&T's business services unit, high-speed data and IP revenue grew at "a high-teen rate" and AT&T Solutions' sales jumped 25 percent. However, business services revenue was up 6 percent overall.

In broadband, AT&T said sales were $1.5 billion, up 7.9 percent from a year ago. It had 2 million digital cable subscribers. The broadband results include Excite@Home results.

Consumer services, also known as long-distance services, remained a drag, with sales of $5.1 billion, down 5.6 percent from a year ago. AT&T said price competition hurt sales, and that many customers are migrating to package deals.

Among other businesses, AT&T said WorldNet Services revenue increased 26.3 percent compared with a year ago. WorldNet has nearly 1.5 million residential subscribers, up 4.5 percent from a year ago.

AT&T has been busy expanding into new markets. The company recently boosted control over Excite@Home. AT&T's stake in Excite@Home, which recently missed estimates, puts it in competition with America Online Inc.

AT&T also boosted its Internet telephony profile by taking a big stake in Net2Phone.

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