Merger Doubles AT&T Profits

AT&T Inc. doubled its profit in the first quarter of 2007 thanks to revenue gained from the merger with BellSouth Corp. late last year.

The integration of Cingular Wireless LLC also contributed to the companys reported net income of $2.85 billion, or 45 cents a share. That was up from $1.45 billion, or 37 cents per share, a year earlier.

The companys sales rose $29 billion, an increase of 84 percent over the first quarter of 2006. AT&T also said it achieved nearly $900 million in savings from the acquisitions.

Still, the company failed to add as many new wireless users as analysts had hoped, and landline subscribership continued to fall by the hundreds of thousands.

Wireless definitely fueled AT&Ts profit gains of 11.2 percent to $10 billion. Data revenue shot up 66.8 percent to $1.5 billion.

Wireless operating expenses, however, totaled $8.5 billion, up 3.6 percent versus the first quarter of 2006. Before merger-related costs, operating expenses were $7.5 billion, down $135 million, or 1.8 percent, compared to the first quarter of 2006. AT&T said that decline was due to reduced network, roaming and customer acquisition costs.

Ed Whitacre, AT&Ts chairman and CEO, said in a prepared statement that wireless margins grew thanks to operational improvements and lower customer churn. Existing subscribers increased their use of messaging, downloading and other data-based activities, which boosted profit. Due in part to the Cingular integration, AT&T added 1.2 million new customers in the first quarter for a total of 62.2 million.

Reuters said that number was lower than some analysts expected.

Meanwhile, AT&T lost 285,000 consumer landlines in the first quarter, compared to 251,000 at the same time a year ago. That amounted to a 3.2 percent revenue decline on the wireline side, the company said. AT&T lost 331,000 lines in the fourth quarter of 2006 alone. Wireline revenue in the first quarter of 2007 came to $18 billion. The company reported revenue of $14.4 billion in the first quarter of 2006, before it acquired BellSouth, which also sold landlines.

AT&T blamed the usual suspects for the declines, including competition and enterprise pricing pressures.

Even as consumer losses continued, AT&T did post slight growth from regional business voice subscribers.

The carrier said Ethernet, managed Internet and VPN services contributed to higher revenue from that sector. It also said its high-speed Internet connections including DSL, AT&T U-verse high-speed Internet and satellite broadband services increased by 691,000 in the first quarter, its largest gain over the past four quarters. The company said it had 12.9 million high speed Internet connections, up 2.3 million over the past year.

Amid those numbers, video growth has begun to ramp, Whitacre said of the carriers struggling TV services.

AT&T said its video connections including its U-verse service and bundled satellite television service increased by 187,000 in the first quarter, up from 111,000 total video net adds. The company said it had 1.7 million total video connections in service, up 520,000 over the past four quarters, and 5.2 percent of its primary consumer lines also had a video product.

The company said it had 13,000 U-verse video subscribers, up from 3,000 three months earlier. By mid-April, U-verse installations had ramped to approximately 2,000 per week, and the service now has approximately 20,000 subscribers, according to AT&T.

AT&T’s stocks were down 49 cents early Tuesday afternoon, trading at $39.28 on volume of 14.2 million shares. That marked a sharp rise from the 8.95 million shares trading earlier in the day.

AT&T Inc.

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