Analysis: Big appetite paying off for AT&T

Jul 26, 2006
AT&T logo

Marriage seems to suit AT&T, if the latest earnings results from the telecommunications giant are any indication.

Since it was bought out by SBC in November 2005, AT&T has seen its financial position strengthen, and late Tuesday the company announced its net income for the second quarter rose more than 80 percent from the same period the previous year to $1.8 billion, while earnings soared nearly 60 percent to $2.3 billion, and cash from operating activities totaled $4.7 billion, up 24.1 percent from a year ago.

"Cingular (the company's cellular arm) generated solid subscriber growth and its best-ever churn. Enterprise trends continue to be encouraging. Regional wireline revenues extended their growth record. Our SBC/AT&T merger integration projects are very much on plan, generating synergies and benefiting customers," said Chief Executive Edward Whitacre. What's more, he added that "these results demonstrate strong momentum as we look forward to the second half of the year and completion of our pending acquisition of BellSouth."

Indeed, last week AT&T shareholders voted overwhelmingly to press ahead with the acquisition of Atlanta-based BellSouth, which it hopes to make happen by this autumn. The potential buyout, however, depends on a number of approvals from both federal and state authorities. Still, according to the latest earnings results from BellSouth, buying out the company may well make good sense. After all, the Atlanta carrier reported earlier this week that it posted its third straight quarter of double-digit earnings growth, with its second-quarter earnings per share rising 14 percent from the same period a year ago to 49 cents, while income from continuing operations rose nearly 12 percent to $887 million.

"Now that the shareowner votes are complete, we plan to ramp up the share repurchase program we outlined in March," Whitacre said. "We expect to buy back $10 billion of our shares by the end of 2007, with approximately $2 billion to $3 billion coming this year."

Furthermore, the company raised its forecast for the full fiscal year and now expects its consolidated operating income margin to be 17 percent to 18 percent, up from the earlier outlook of 15 percent to 16 percent. In addition, the company said it expects to be able to save between $700 million and $900 million for the full year as a direct result of the merger with SBC, up from its initial expectation of savings reaching between $600 million to $700 million.

At the same time, some analysts cautioned that it was still too early for AT&T to assume that making all the big-scale mergers will lead to instant profits.

Mergers have "the potential to be distracting and costly, although over time AT&T should be able to squeeze significant additional synergies out of the business, thanks to SBC's long track record in integrating acquisitions," said Jan Dawson, an analyst at London-based information-technology research group Ovum.

Copyright 2006 by United Press International

Explore further: Samsung removes logo on smartphones in Japan

Related Stories

Mexico boosts protection of near-extinct porpoise

2 hours ago

Mexico is greatly expanding a protected area of the Gulf of California and boosting navy patrols in an effort to save the vaquita marina, a small porpoise facing imminent extinction.

Court monitor: Apple antitrust cooperation has 'declined'

2 hours ago

Apple Inc.'s cooperation with efforts to improve its compliance with antitrust laws after a federal judge concluded it colluded with electronic book publishers to raise prices five years ago took on an "adversarial tone" ...

SEC questions LA Unified on use of bonds for iPad project

2 hours ago

The Securities and Exchange Commission recently questioned Los Angeles Unified School District officials as part of informal inquiry into whether they properly used bond funds for a beleaguered $1.3 billion project to provide ...

Recommended for you

Taiwan factory workers win $18 mn over cancer deaths

Apr 17, 2015

Workers from a factory in Taiwan which leeched toxic chemicals they say resulted in 200 deaths from cancer and more than 1,000 other cases of the disease won a Tw$564.45 million ($18 million) payout from US electronics company ...

Court monitor: Apple antitrust cooperation has 'declined'

Apr 17, 2015

Apple Inc.'s cooperation with efforts to improve its compliance with antitrust laws after a federal judge concluded it colluded with electronic book publishers to raise prices five years ago took on an "adversarial tone" ...

SEC questions LA Unified on use of bonds for iPad project

Apr 17, 2015

The Securities and Exchange Commission recently questioned Los Angeles Unified School District officials as part of informal inquiry into whether they properly used bond funds for a beleaguered $1.3 billion project to provide ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.