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SBC's 1Q Profits Fall But Exceed Expectations

The nation's No. 2 local-phone provider says net income dropped 61%, largely due to accounting changes.
SAN ANTONIO (AP) -- SBC Communications Inc.'s profit dropped 61 percent in the first quarter from results swelled by the effects of an accounting change a year ago, but the telecommunications concern's results still easily surpassed expectations.

SBC, the nation's No. 2 local-phone provider, posted profits totaling $1.9 billion, or 59 cents per share, in the three months ended March 30. That compares to $5.0 billion, or $1.50 cents a share, in the first quarter of 2003, which included a benefit of more than $2.5 billion due to accounting changes.

Both quarters also included significant gains from selling holdings in overseas telecom ventures. In the most recent quarter, SBC picked up 22 cents per share from its sale of its stake in Belgacom SA.

Not counting the one-time gains, SBC's earnings of 37 cents a share in the latest quarter was five cents lower than the same period a year ago, but exceeded the analyst consensus of 32 cents, according to Thomson First Call.

San Antonio-based SBC posted revenue of $10.1 billion in the quarter, down from about $10.4 billion in the first quarter of 2003.

Local-phone service provided more than half of SBC's revenue, but sales dropped 9 percent to $5.23 billion.

SBC said its loss of local-phone customers have slowed in recent quarters. The company reported 305,000 access-line disconnects in the first quarter, down from 424,000 in the preceding quarter and 748,000 in the first quarter of 2003.

Much of that local phone service revenue loss was offset by growth in broadband and data services, up 6.8 percent to $2.6 billion, and long-distance phone service, up 29.6 percent to $749 million.

"We delivered very strong execution across our key growth initiatives," said Edward Whitacre, SBC chairman and chief executive.

Whitacre said the company enhanced its strategy of bundling services on a single telecom plan with the February acquisition of AT&T Wireless by Cingular Wireless and the March launch of satellite TV in partnership with Dish Network.

SBC owns a 60 percent share in Cingular, while BellSouth Corp. owns 40 percent.

"We made solid progress in adding to our capabilities and winning customers in the large business space," he said. "All of these areas represent significant opportunities for SBC."