AT & amp;T doubles profits, sales in 1st quarter

AT & amp;T says it's on track with its integration of former BellSouth operations.
SAN ANTONIO (AP) -- Telecommunications heavyweight AT & amp;T Inc. reported Tuesday it doubled its profit and sales in the first three months of the year, primarily because of its completed acquisition of BellSouth.
Profit reached 2.85 billion, helped by the BellSouth acquisition and growth in wireless revenue. The earnings, which included 2.3 billion in acquisition-related charges and a 409 million gain from the sale of some assets, amounted to 45 cents per share for the period ended March 31. That was up from 1.45 billion, or 37 cents per share, earned by AT & amp;T in the first quarter of 2006, when it had not yet acquired BellSouth.
First-quarter revenue rose 84 percent to 28.97 billion, up from a pre-merger tally of 15.76 billion in the same period a year ago.
"It was an important three months for us in terms of transition," said Chief Financial Officer Rick Lindner in a call with analysts. "I feel good about how we started. Our integration is on track."
Had BellSouth and AT & amp;T been combined in the first quarter of 2006, they would have reported roughly the same amount of revenue at 28.9 billion, and net income of 1.98 billion.
Still, Lindner said in an interview with The Associated Press that it is important to note the company grew revenue aside from the BellSouth boost.
"When you take out all the noise from the acquisition, we grew revenue, and that growth rate is increasing," he said. "Some of that top-line growth is being driven by wireless."
Adding customers
The wireless unit, which is being rebranded from Cingular to AT & amp;T, added 1.2 million customers, finishing the quarter with 62.2 million. It also generated higher revenue from non-voice services including text messaging, Web browsing and content downloads.
"We're confident AT & amp;T has a terrific future in wireless," said Lindner, noting the buzz around Apple Inc.'s upcoming iPhone. AT & amp;T will be the exclusive carrier for the iPhone, a smart phone integrated with an iPod media player, when it goes on sale in June.
He said the San Antonio-based company, which changed its name from SBC Communications after the 2005 acquisition of the AT & amp;T long distance business, continues to wring savings from that purchase and that the BellSouth deal is on track to eliminate up to 1.2 billion in overlapping costs in 2007.
The company also reaffirmed its previous revenue guidance for the year, saying it continued to expect a revenue growth percentage in the midteens.
Excluding merger-related costs, accounting changes and the previously announced sale of wireless assets, the company earned 65 cents per share, or 4 cents a share more than the average forecast among analysts surveyed by Thomson Financial.
But AT & amp;T's shares, which have been trading at a five-year high in recent weeks, fell 67 cents, or 1.7 percent, to close at 39.10 on the New York Stock Exchange.
Wire connections decline
AT & amp;T's wireline connections continue to decrease as customers migrate away from traditional telephone service. Across the 22 states where AT & amp;T is the dominant provider of local phone service, the company lost 285,000 lines in the first quarter, more than the 251,000 lost in the same period in 2006 but fewer that it lost in the fourth quarter.
Sales to large businesses fell 4.4 percent. The company said the decline was part of its plan to emphasize higher-margin services, while noting that data revenue grew in that segment.
Regional business sales rose with growth in voice and data revenue.
After numerous delays and stumbles, the crucial rollout of the company's premium television service, U-verse, now has 20,000 subscribers, up from 18,000 at the close of the quarter and just 3,000 at the start of the year.
Lindner said AT & amp;T is currently adding 2,000 subscribers a week and expects to be adding 10,000 per week by the end of the year. The company also hopes to have U-verse, now available to about 3 million homes, introduced in its first BellSouth market by the end of the year.
Analysts have been watching the U-verse initiative closely. The service, delivered over a high-speed Internet connection, is designed to help stave off competition from cable TV companies, which have been peeling off telephone and high-speed Internet customers with bundled services.

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