Optical/IP Networks

Carrier Revenues Keep Sliding

Some major U.S. carriers reported quarterly profits this week, but, in most cases, revenues continued to fall. While all the carriers touted their cost-cutting regimens, the RBOCs, overall, seemed to show less of an erosion of business than the IXCs.

The RBOC advantage, is of course, incumbency. But those carriers also seem to have something to sell customers, no matter what a customer decides regarding local calling, long-distance calling, wireless service, data service, and/or, as announced recently, satellite TV service (see SBC's EchoStar Pact: For Real?).

Investors, however, don't appear terribly hot or cold to the recent earnings news. The Dow Jones Telecom Index, which comprises all the major U.S. carrier stocks, was down $0.92 (0.81%) to $112.63 in early afternoon trading on Tuesday.

  • Sprint Corp. (NYSE: FON) reported second-quarter revenues of $6.5 billion, a slip from the revenues of $6.7 billion it reported during the year-ago period (see Sprint Reports Q2 Profit). However, the company managed a $7 million profit for the quarter, compared to a net loss of $68 million during the second quarter of 2002, when it wrote down the value of some investments.

    Though the company is aggressively moving on its DSL strategy, its consumer voice revenues dropped more than 30 percent from a year ago. Its retail business voice revenues also dropped at a high single-digit rate, and its wholesale voice revenues fell more than 20 percent from the year-ago period.

  • AT&T Corp. (NYSE: T) made a drastic improvement over its numbers from a year ago and it, too, reported a profit (see AT&T Turns Q2 Profit). However, the company's revenues, like those of its ILEC counterparts, continued to fall -- to $8.8 billion, down 8.2 percent from last year. Its net income for the quarter was $536 million, a nice improvement over the $12.8 billion loss it reported a year ago.

    On Wall Street, there's much back-and-forth about whether AT&T is a choking business with limited upside, or a gem that is undervalued and misunderstood. "Overall demand for telecom services remains weak, but AT&T continues to execute by taking market share from distressed competitors, attacking incumbent LECs, and ripping costs out of its model," writes Kaufman Bros. LP analyst Vik Grover, in a research note published last week.

    Grover is right about Ma Bell attacking competitors. She's been trashing MCI/WorldCom (Nasdaq: MCIT) for more than a year now, and it doesn't look to let up (see MCI's 'Creative Routing' and AT&T's Dorman Weighs In on WorldCom).

    In contrast to the IXCs, the RBOCs continued with decent revenues and big quarterly profits.

  • SBC Communications Inc.'s (NYSE: SBC) revenues were $10.2 billion, down from $10.8 billion in the year-ago period (see SBC Slips Slightly, Stays Strong in Q2). The company also turned a handsome profit of $1.4 billion, down slightly from the $1.8 billion profit it reported during the second quarter of 2002.

  • Verizon Communications Inc. (NYSE: VZ) also reported a quarterly profit. The company's net income was $338 million for the quarter, better than the loss of $2.12 billion it reported a year ago (see Verizon Posts Q2 Profit). Unlike its peers, though, Verizon was actually helped by the move many are making to wireless phones. Its revenues increased to $16.8 billion from $16.75 billion recorded last year.

    Nothing new was said on the labor negotiations front, which could affect more than 78,000 of Verizon's domestic workers. The company's labor contracts with the union representing those workers expire at midnight on August 2.

    Other carrier earnings reported of late include: — Phil Harvey, Senior Editor, Light Reading

  • grapsfan 12/4/2012 | 11:42:20 PM
    re: Carrier Revenues Keep Sliding Actually, the RBOCs are a subset of incumbent carriers. The term also refers to all of the "mom 'n' pop" rural phone companies who service areas not covered by RBOC networks. After all, someone was the incumbent there too.

    That said, I think LR meant "IXCs" instead of "ILECs" in that sentence, considering they were talking about AT&T and MCI with the previous two bullets.
    smpte 12/4/2012 | 11:42:20 PM
    re: Carrier Revenues Keep Sliding After divestiture, "The" telephone company was broken up into Regional Bell Operating Companies who had exclusive control over their service areas. In 1996 the Reform then started referring to them as "Incumbent Local Exchange Carriers".

    So the RBOCs 'became' ILECs, to indicate that they were the Incumbent provider and had to meet the criteria set forth in the Reform.

    Which is why the phrase "In contrast to the ILECs, the RBOCs continued with decent revenue..." makes absolutely no sense.

    Otherwise the article is very informative... thank you.

    DCITDave 12/4/2012 | 11:42:16 PM
    re: Carrier Revenues Keep Sliding You're right. It was a mistake. All better now.
    grapsfan 12/4/2012 | 11:42:13 PM
    re: Carrier Revenues Keep Sliding Thanks for the clean-up, Phil...but the point about Tier II rural incumbents got me thinking a little bit (dangerous, I know):

    - Are the non-Bell ILECs seeing the same sort of revenue growth and profit maintenance as the Bells?
    - Are the CLECs that are still in existence, as an industry, maintaining revenue? Or are there just a few shining stars, like CenturyTel and Alltel?

    ...and, something not really related...

    - How much are the rural ILECs really helped by the Universal Service Fee that we all pay on our phone bills (except, of course, those of us who are serviced by rural ILECs)? What % of their revenue comes from that? Do people in Podunk, North Dakota have service that I dream about, and I'm paying for it?
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