AT&T boosts third-quarter income

AT&T has reported an increase in third-quarter net income but saw sales drop because of continued weak customer demand and...

AT&T has reported an increase in third-quarter net income but saw sales drop because of continued weak customer demand and long-distance service pricing pressures.

Third-quarter net income  was $418m, which ended 30 September, compared with $207m, for the same period last year. The previous year's figure was brought down by charges for discontinued operations.

The company's effort to "relentlessly reduce costs" led to the higher income, said Thomas Horton, chief financial officer. AT&T is nearly finished with its goal to cut its workforce from about 71,000 to 65,000 in 2003, company officials said, and those cuts will save about $650m in 2004.

AT&T also reported a $125m accounting error discovered in September. The company's expenses relating to access and connections was understated by that amount, Horton said, for costs incurred in late 2001 and 2002. 

The error reduced AT&T's 2001 net income by $32m and its 2002 net income by $45m. After discovering the error, the company reported it immediately.

Third-quarter operating income - including revenue from core businesses but excluding related expenses - dropped to $829m from $1.4bn for the same period a year earlier.

Total revenue in the third quarter was $8.6bn, compared with $9.4bn a year earlier.

Long-distance voice revenue, AT&T's core business, dropped 10.5% on a quarter-over-quarter basis, driven by continued pricing pressure.

AT&T had a "solid" quarter despite stiff competition in the telecommunications industry, said Dave Dorman, the company's chairman and chief executive officer.

"While the impact of a weak economy, pricing pressures, increased competition and technological substitution are affecting sector performance, AT&T continues to operate from a position of industry leadership and strength," Dorman said. 

"We believe AT&T is positioned as a significant beneficiary of the eventual economic recovering filtering through to the telecom market, though there is still much more work to be done."

Grant Gross and John Blau write for IDG News Service

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