AT&T Reports Healthy Q4
In the fourth quarter, AT&T reported net income of $1.9 billion, or 50 cents a share, on revenues of $15.9 billion. Compared to the same quarter of 2005, revenues were up 23 percent and profits up 17 percent.
For the whole year, AT&T earned $7.3 billion with revenues of $63 billion -- up 53 percent and 44 percent, respectively. Non-GAAP earnings per share, which ignore merger-related costs, were 61 cents, beating analyst estimates by a penny, according to Reuters Research .
AT&T stock traded flat today, up 29 cents (0.8%) at $36.92 late in the afternoon.
AT&T's earnings got boosted by the anticipated cost savings of the 2005 merger with SBC. The company reported savings of $1.1 billion for 2006, which is $300 million better than it had forecast in January 2006. AT&T looks to further improve its cost structure in 2007, officials said on a conference call with analysts this morning.
Regarding AT&T's more recent merger with BellSouth, officials said the reuniting of Cingular Wireless with AT&T should also contribute to strong growth in the coming year. Cingular's earnings jumped in the fourth quarter of 2006, and AT&T chairman and CEO Edward E. Whitacre Jr. said on the call that wireless makes up 34 percent of the newly merged company's business. (See Cingular Earnings Nearly Quadruple.)
Still, questions linger over what the merger means for BellSouth's equipment suppliers. One sticking point has been AT&T's commitment to continue to deploy its fiber-to-the-node (FTTN) technology as opposed to the fiber-to-the-home (FTTH) that Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), for example, has helped roll out in the BellSouth region. (See Ma Bell Merger Thumps Tellabs and Wall Street Frets About BellSouth Suppliers.)
Tellabs CEO Krish A. Prabhu stated earlier this week that his company planned to continue to work with AT&T to upgrade the carrier's fiber lines. But that relationship could be weakened based on Whitacre's comments in today's earnings call. "We are committed to IPTV and the FTTN network," he said. "Our FTTN architecture is performing better than we anticipated it would. This is our Plan A, and we are sticking with it."
Tellabs officials couldn't immediately be reached for comment.
Separately, AT&T said its U-verse service was launced in 11 markets and will add four more in early 2007. AT&T was encouraged that 70 percent of all U-verse subscribers opted for the high-end video package and the fastest broadband speeds.
The company also added 383,000 broadband connections -- up 5.5 percent from the fourth quarter of 2005 -- and saw regional business revenues climb 7.5 percent from the fourth quarter of 2005. — Raymond McConville, Reporter, Light Reading