Tax Benefit Pumps AT&T Profit

4th-Quarter Earnings Jump 84 Percent on Write-Down

NEW YORK, Jan. 20 -- AT&T Corp.'s fourth-quarter earnings climbed nearly 84 percent, to $625 million, with more than half of the profit coming from a tax benefit related to last fall's write-down in the value of the huge long-distance telephone company's assets.

The profit for the final three months of a rough year for AT&T amounted to 78 cents per share, the company said Thursday. In the same period in 2003, AT&T earned $340 million (43 cents).

Fourth-quarter revenue totaled $7.3 billion, down 10.2 percent from the year-ago tally of $8.1 billion, as fierce price competition and last year's unexpected regulatory changes continued to erode the company's telephone and data businesses.

The business services division generated $5.5 billion of the revenue, down 7.4 percent, while the consumer services unit's revenue declined 7.9 percent, to $1.8 billion.

The fourth-quarter profit included an after-tax depreciation benefit related to last fall's multibillion-dollar write-down in the value of AT&T's assets. The company recorded a charge of $12.5 billion in the third quarter to cover the asset write-down and severance costs for more than 12,500 job cuts.

Because quarterly depreciation expenses are based on an estimate of the wear and tear on the total value of various types of equipment and property, the reduced book value of AT&T's assets meant a drop in that cost in calculating the company's profit.

For all of 2004, the company swung to a loss of $6.1 billion ($7.68), including $12.8 billion in charges for the asset write-downs and other restructuring moves. In 2003, AT&T earned $1.9 billion ($2.36).

Full-year revenue declined 11.6 percent, to $30.5 billion, compared with $34.5 billion in 2003.

The sharp drop in revenue is expected to continue in 2005, shrinking 15 percent to 18 percent to between $25 billion and $26 billion, the company estimated Thursday.

AT&T shares fell 44 cents, or 2.4 percent, to $18.07 in trading on the New York Stock Exchange Thursday.