SBC Profit Shrinks, but Line Losses Decline

SBC Communications Inc. on Tuesday reported a weaker profit and revenue in the fourth quarter compared to the period a year ago, but said consumer line losses declined.

The San Antonio, Texas, phone company reported fourth-quarter net income of $905 million, or 27 cents per share, compared with $2.4 billion, or 71 cents per share, in the period a year ago. SBC, the No. 2 local phone company, posted revenue of $10.1 billion, compared with $11.2 billion in the fourth quarter of 2002.

SBC said earnings were partially affected by access line losses, increases in pension and retiree benefit costs, and higher expenses attributed to growing its long-distance and broadband businesses.

The regional Bells have been suffering steady erosion in their core local phone business. In the fourth quarter, SBC recorded 424,000 consumer retail access line losses, but the company said those losses were down 32 percent from the third quarter. In the Midwest, where SBC did not start offering long-distance services in four states until the fall, the decline was 54 percent lower than in the third quarter.

Companywide, SBC said the fourth quarter increase in total wholesale lines was 63 percent lower than the increase in the third quarter, and about one-sixth the increase in the fourth quarter of 2002.

To protect its core local phone business and earn more customer dollars, the Bells have introduced a number of bundled packages over the year, such as unlimited calling, broadband and wireless. In the fourth quarter, SBC added 2.9 million consumer and business long-distance lines, ending the year with 14.4 million. The company added 377,000 DSL lines in the quarter, bringing its total to 3.5 million.

Over the last year, the number of customers who subscribe to local phone service, plus long distance, broadband or wireless has more than doubled to 44 percent, SBC reported.

SBC plans to add another essential ingredient to its telecom menu – satellite TV services – beginning in March.

In the fourth quarter, SBC also reported its telephone line losses have shrunk in the business market.

“Driven primarily by the economy, SBC’s business voice line losses have improved steadily since their peak in the fourth quarter of 2001, and SBC’s fourth-quarter 2003 total is the company’s lowest in the past three years,” the company stated in an investor briefing.

SBC reported fourth-quarter data revenue of $2.6 billion, the best year-over-year growth in more than two years. For the entire year, data revenue totaled $10.2 billion, up 5.3 percent from 2002.

Ed Whitacre, Jr., SBC Chairman and CEO, said the company’s main target in the business sector is large businesses. The company says large businesses with at least half their locations in the company’s 13-state region represent a $34 billion market.

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