InformationWeek

June 21, 1999

Telecom Companies Plan For Future

By David Kleinbard

T&T has made a mammoth bet on cable as the future delivery mechanism for voice and data to American households with its $55 billion acquisition of cable giant Tele-Communications Inc. and its proposed purchase of MediaOne Group Inc. for $58 billion in stock and cash. If the acquisition of MediaOne is completed, AT&T's owned-and-operated cable systems will pass about 26.5 million households, giving AT&T a significant presence in 18 of the top 20 markets.

AT&T's revenue for the quarter ended March 31, excluding TCI, rose 6.1% to $13.6 billion, compared with $12.8 billion in the first quarter of 1998. AT&T's business services, wireless services, AT&T Solutions, and international operations and ventures all contributed to the revenue growth. As anticipated, these increases were partially offset by a decline in consumer services revenue.

Meanwhile, Sprint has made a large bet on personal communications services technology. Sprint made about $592 million in capital expenditures in the quarter ended March 31 to expand its PCS network. However, the PCS unit racked up $479 million of cash-flow losses on revenue of $604 million in the quarter.

Revenue from Sprint's FON division, which includes its local and long-distance telephone services, increased 7% in the first quarter of 1999 to $4.17 billion from $3.89 billion in first quarter of 1998. The FON division's net income was $406 million in the quarter, a 16% increase from $352 million a year ago.

MCI WorldCom reported first-quarter revenue of $8.3 billion, excluding its holdings in Brazilian telephone company Embratel--a 15% increase over pro forma revenue of $7.25 billion in the 1998 quarter. While revenue from voice services rose a modest 7% to $5.09 billion, data revenue rose 31% to $1.7 billion, and Internet revenue soared 60% to $758 million. MCI WorldCom reported net income of $729 million for the first quarter ended March 31, up from pro forma net income of $169 million for the same period in 1998.

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