BellSouth's Revenue Slides, But Profits Soar - InformationWeek

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BellSouth's Revenue Slides, But Profits Soar

The phone company reported a huge jump in 2Q net income, primarily due to foreign currency losses in the year-ago quarter.

ATLANTA (AP) _ BellSouth Corp. reported weaker revenue, but a huge jump in second-quarter profits--primarily due to foreign currency losses a year ago.

Its results, reported Wednesday, beat Wall Street expectations.

The Atlanta-based phone company said that for the three months ended June 30, net income was $951 million, or 51 cents a share, compared to a profit of $263 million, or 14 cents a share, a year earlier. The prior year results included a 38-cent reduction to reflect losses in foreign currency transactions.

Excluding one-time items, including the sale of a Brazilian asset and pension and severance costs, BellSouth said it earned $971 million, or 52 cents a share, compared to a profit of $975 million, or 52 cents a share, in the same period a year ago.

On that basis, analysts surveyed by Thomson First Call had expected earnings of 49 cents a share.

Revenue for the quarter was $5.64 billion, a 2.4 percent reduction from the $5.78 billion BellSouth brought in a year ago.

For the first six months of the year, BellSouth reported net income of $2.18 billion, or $1.18 a share, compared to a profit of $109 million, or 6 cents a share, a year ago.

Revenue for the first six months was $11.17 billion, a 1.3 percent reduction from the $11.31 billion BellSouth brought in a year ago.

BellSouth, now one of four regional phone companies that emerged from the Bell System breakup, is the dominant local service provider in nine Southeastern states.

Competing in long distance throughout its markets since the first of the year, BellSouth gained 856,000 long-distance customers in the second quarter and now serves a total of 2.8 million. BellSouth added 103,000 customers for digital subscriber line Internet service, for a total of 1.2 million at quarter's end.

But the company said its revenue was hurt by the weak economy.

All the Bell companies are having trouble keeping local access lines in an increasingly competitive market. At the end of the second quarter, BellSouth had 24.2 million access lines in service, a 3.9 percent reduction from the 25.1 million it had a year ago.

Spokesman Jeff Battcher said BellSouth believes its bundling programs, which offer a group of services for a fixed price, will keep customers from switching phone providers and taking their access lines with them.

BellSouth said it has reduced its work force by 10.4 percent over the past year, from 84,617 employees in 2002 to 75,779 employees at the end of the second quarter.

In a conference call with analysts, chief financial officer Ron Dykes blamed the slumping economy for the decline in access lines. He also said economic conditions were difficult in Latin America, especially Venezuela, where BellSouth has its largest operation in the region.

But Dykes said the company's growth in long distance and DSL helped offset some of the losses in local phone customers.

The company did not give any new guidance for future quarters. Dykes said the company stopped giving quarterly earnings guidance earlier this year. Some large companies, like Coca-Cola, have stopped providing such guidance because they say it detracts from their focus on long-term strategy.

Analysts are expecting BellSouth to earn 49 cents a share in the third quarter.

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