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7/26/2004
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BellSouth's Profits Grow Despite Flat Revenue

Net income in the second quarter rose nearly 5% although the company continued to lose access lines.

ATLANTA (AP) -- Telecommunications giant BellSouth Corp. reported a nearly 5 percent gain in second-quarter profit on flat revenue as it continued to lose access lines but benefited from growth in its long-distance and high-speed Internet services.

The results, announced Monday, beat Wall Street expectations.

Atlanta-based BellSouth said it earned $996 million, or 54 cents a share, for the three months ending June 30, compared to a profit of $951 million, or 51 cents a share, in the same three-month period a year ago.

Analysts surveyed by Thomson First Call were expecting earnings of 50 cents a share.

Revenue in the April-June quarter was roughly the same as last year at $5.08 billion.

BellSouth said it added 535,000 mass-market long distance customers in the second quarter. The company said the increase was driven by its offering of unlimited long-distance plans and new flat-rate calling plans.

BellSouth said it added 120,000 net DSL customers during the second quarter. Total access lines, however, declined in the quarter by 832,000, or 3.7 percent, from a year ago to 21.8 million.

"It's pretty obvious to us that wireless continues to take a large piece of the access line market," said chief financial officer Ron Dykes.

Dykes said the loss of access lines has hurt BellSouth's overall revenue growth. Still, he said, the company has been able to offset that with growth in other segments, like long-distance and Internet.

BellSouth is the dominant local phone provider in nine southeastern states. It jointly owns Cingular Wireless LLC, the nation's No. 2 cell-phone provider, with SBC Communications Inc. of San Antonio.

Dykes said Cingular's planned $41 billion all-cash acquisition of AT&T Wireless Services Inc. is on schedule and is expected to close in the fourth quarter. He said BellSouth is conserving as much cash as possible to pay for its $16 billion share of the deal.

In the second quarter, Cingular added 428,000 net customers, bringing its total base to 25 million, BellSouth said.

As for its work force, BellSouth ended the second quarter with 64,113 employees, a 3.1 percent decline from a year ago, when it had 66,170 employees, spokesman Jeff Battcher said.

For the first six months of the year, BellSouth said it earned $2.60 billion, or $1.41 a share, compared to a profit of $2.18 billion, or $1.18 a share, in the year-ago period. Six-month revenue was down slightly at $10.06 billion, compared to $10.09 billion a year ago.

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