AT&T Warns of $10B Hit

AT&T has issued a profit warning for its fourth quarter, citing changes to the expected returns on its pension plan and the impact of storms and smartphone sales. The operator will record a non-cash charge of about $10 billion related to the value of its pension plans, as it now expects a lower rate of return on its investments, it stated in a filing with the SEC. That will hit the company's balance sheet but not its operating figures. However, there's bad news on that front too. The impact of various storms, including Superstorm Sandy, on AT&T's service revenues and costs (mostly related to its wireless operations) is expected to result in a $175 million hit on its fourth-quarter operating income. (See Operators Slog Ahead in New York & New Jersey and Sandy: The Case for Better Cell Site Backup?) In addition, end-of-year sales of high-end mobile devices will also affect the company's profitability. AT&T noted: "Fourth-quarter total smartphone sales were approximately 10.2 million devices. Due to the high subsidies on these devices, we expect a near-term pressure on operating income, margins, and earnings per share in the fourth quarter of 2012." — Ray Le Maistre, International Managing Editor, Light Reading