SBC: DSL numbers up, revenue down

Susan Rush
From the October 24th edition of CED Broadband Direct

SBC Communications Inc.'s third quarter results offer a mixed bag. On the one hand, the company beefed up its DSL subscriber numbers, but on the other SBC suffered a 5 percent year-over-year drop in revenue.

According to the service provider, it has become the first company to have 2 million DSL lines in service. It added 226,000 DSL subscribers in the third quarter. During the first three quarters combined, SBC has added 655,000 subscribers, which translates to an 88 percent year-over-year increase. SBC signed up its first DSL customer in August 1999.

"Despite a tough regulatory and economic environment, we delivered exceptional results adding DSL Internet subscribers, primarily as a result of effective marketing initiatives and the introduction of SBC Yahoo DSL service," CEO Edward Whitacre said in a release.

On a less brighter note, SBC posted revenue of $12.8 billion, down from $13.5 billion in the third quarter 2001. The company's revenue number includes proportionate revenue from Cingular Wireless.

Pro forma income was recorded at $1.7 billion, or 51 cents a share. Analysts were calling for EPS of 54 cents, according to Thomson First Call.

The company lost 751,000 phone lines to rivals who lease space and resell service on its network. The company lost the lines primarily to AT&T and WorldCom. SBC has announced plans to pare its work force by roughly 20,000, but Whitacre has said that cost-cutting measures are not enough. The company needs help from regulators, according to Whitacre. "We continue to respond aggressively by reducing costs, but no amount of cost-cutting can offset the effects of rules that require us to sell our lines and related services to our competitors below cost," Whitacre said in a prepared statement.

Looking ahead to full-year 2002, SBC said it is on target to post earnings of $2.26 per diluted share, before special items. The company did not provide a full-year revenue forecast.

As of 12:13 p.m. EDT, SBC shares were trading at $25.71. In the last 52 weeks, the company's shares have traded as high as $40.99 and as low as $19.57.