AT&T first-quarter revenue and net income has slipped compared with the same period last year.
Revenue in the quarter to 31 March fell to $7.99bn, down from $8.99bn a year earlier, while net income for the quarter fell to $304m from $571m. Operating income fell to $281m from $1.17bn.
The main cause of the decline in revenue was a fall in long-distance voice and data service revenue.
Although revenues are falling, this will turn around as the company's success in retaining and acquiring customers takes effect, said chairman and chief executive officer David Dorman, who admitted it would take time for these to translate into improved performance.
"The short-term performance of the telecommunications sector will continue to suffer due to oversupply," he added.
AT&T's business sector contributed $5.9bn of the revenue, 9.1% down from a year earlier. The company blamed pricing pressure, competition and demand weakness in retail long-distance services for the business unit's performance.
Growth in internet protocol & enhanced-services (IP&E) revenue, up 5.9% over the previous year, offset this decline. Advanced services such as Enhanced Virtual Private Network and IP-enabled frame relay contributed to this growth.
As business customers terminated or reduced the size of outsourcing contracts, revenue from this area and from other professional services dropped 13.4%, although professional services for government remained a strong area.
AT&T's business unit made $470m of capital expenditure during the quarter. Much of this went into technologies to help the company improve the company's cost structure.
AT&T's consumer unit brought in first-quarter revenue of $2.1bn. This was mainly caused by a decline in long distance revenue, driven down by price competition, and customers switching to lower-cost calling plans or other means of communication such as wireless of VoIP.
Revenue from bundled local and long-distance services grew 52%, accounting for more than 30% of AT&T's consumer revenue. AT&T offers such bundled services in 46 US states, and can include DSL service as part of the bundle in 25 states.
Peter Sayer writes for IDG News Service