SBC on Lightspeed: Full Fiber Ahead
On an earnings conference call last week, SBC officials said Lightspeed is on track to connect 2 million homes in the project this year. The company also reported a fairly strong third quarter in which the company absorbed costs from its Cingular Wireless LLC acquisition and inched closer to finalizing a merger with (NYSE: T).
CFO Richard G. Lindner said that SBC hopes to have fiber deployment “out and passed to facilitate 2 million homes on Lightspeed” before the end of this year. A “prepared launch” should take place sometime in 2006, he said. And Richard Dietz, vice president of investor relations, asserted that “the service is working and the project is on track.”
But doubts about the status of Lightspeed remain. The question is whether just "passing" a home really counts in the day and age of ultra-competitive broadband.
“ ‘Homes passed’ is a testosterone kind of issue,” says Kermit Ross, an independent telecom analyst. “What’s really important is how many customers they win and how many homes they hook up.”
Even as the company continues its move to data and IP-based services, wide Lightspeed deployment with live IPTV services may be still years away, due to reported delays with Microsoft Corp.’s (Nasdaq: MSFT) TV solution. (See SBC, Microsoft Defend Lightspeed.)
On the earnings call, SBC officials reiterated that Microsoft had “delivered the code for the platform,” but they did not address the reported glitches.
Nevertheless, Lindner said SBC will start putting more money toward Lightspeed during the next few quarters, which will put pressure on the 2006 capital budget. “We’ve been pretty frugal with our capex dollars, running in the low double-digits,” Lindner said. “But we will begin to see some pressure on that number.”
Although profits declined almost 40 percent from the year-ago quarter -- net income was $1.25 billion, or 38 cents a share, down from last year’s $2.1 billion, or 63 cents -- SBC said these numbers included $149 million in merger-related charges and $96 million in Hurricane Katrina damages suffered by Cingular.
Excluding these costs, SBC earned 47 cents per share, beating the average analyst estimate of 41 cents.
SBC stock prices have remained fairly steady since the statement, closing at $23 per share on Friday -- still down from the year’s high-water mark of $26.70 but slowly crawling back from a rough few weeks in which heavy industry competition kept investors away.
SBC officials said they expect to see shares, which they say are now “significantly undervalued,” continue to increase in price, and they have announced a buyback plan that may reach $1 billion.
And SBC reported a record quarter for DSL access lines, with 528,000 new lines added.
Further brightening the picture was AT&T's potentially final earnings statement, also made last week, which beat analysts’ estimates, reporting $520 million in third-quarter income and a profit increase of 64 cents per share. AT&T closed at $19.01 on Friday, up 2.3 percent.
Both companies have assured investors that SBC’s $16 billion deal to buy its former parent will clear regulatory hurdles and close before year’s end.
— Joe Tuzzo, special to Light Reading