AT&T Reports $7 Billion Loss
Retreat From Traditional Phone Service Causes Drop
Friday, October 22, 2004; Page E03
NEW YORK, Oct. 21 -- AT&T Corp. reported a third-quarter loss of $7.12 billion Thursday because of huge charges resulting from the company's retreat from traditional telephone services, which included at least 7,500 more job cuts and a write-down in the value of the company's long-distance network.
In the corresponding quarter last year, AT&T earned $418 million, or 53 cents a share.
Shares of AT&T rose 22 cents, or 1.4 percent, to close at $15.80 on the New York Stock Exchange.
Consumer revenue fell 15.2 percent, to $1.98 billion, driven by a sharp drop-off in new customers following AT&T's decision to stop marketing local and long-distance service. Long-distance price wars and the loss of business to wireless and Internet-based calling also reduced revenue.
AT&T, still the nation's largest long-distance company with 26 million customers, said two weeks ago that it would reduce the book value of its assets by about $11.4 billion now that its network is expected to generate far less revenue from consumer voice traffic.
The decision to cut spending on customer acquisitions followed a federal court decision that will make it more expensive for AT&T to sell local service by leasing residential lines from the four regional phone companies -- which at the same time are luring away AT&T's long-distance customers.
When it announced the write-down, AT&T also said it was expanding this year's job cuts to more than 20 percent of the workforce, or at least 12,500 jobs. The company had previously projected a downsizing of 8 percent of the workforce, or about 4,900 positions. More than 9,000 of the affected employees have either already left the company or been notified they were being laid off.
To cover severance benefits and other costs related to those cuts, AT&T said it would record a charge of about $1 billion with the third-quarter results.