Bad news keeps calling in the telecommunications industry, as a big loss posted by long-distance giant AT&T Corp on Tuesday brought reported second-quarter losses in the industry to more than US$20 billion in just two days.
Suffering from an exodus of customers to wireless phones and electronic mail, stiff competition and overcapacity, AT&T joined Lucent Technologies Inc, SBC Communications Inc and BellSouth Corp in reporting gloomy news -- all in the wake of the largest-ever bankruptcy filing by WorldCom.
"Everyone's getting killed," Morningstar analyst Todd Bernier said. "It's just a brutal, brutal market right now."
AT&T, the nation's biggest long-distance telephone and cable-television company, posted a US$12.7 billion second-quarter loss after charges to write down the value of some assets.
Revenue fell more than 6 percent as sales and calling volumes flagged. Sales to residential customers in particular plunged by more than a fifth as users opted for wireless phones and Internet services over long-distance calls.
Yet AT&T benefited somewhat from the woes of rival WorldCom, as customers sought alternative service providers.
WorldCom, the second-largest US long-distance telephone and data services company that transmits half of the world's Internet traffic, filed for bankruptcy protection on Sunday, sunk by a US$3.85 billion accounting scandal and a heap of junk-rated debt.
AT&T also said it saw some light at the end of the tunnel -- that the rate of customers shifting to wireless phones and e-mail had begun to stabilize.
AT&T Wireless Services Inc posted lower quarterly net income due to one-time gains a year ago, but said service revenue rose as the No. 3 wireless telephone company added more than 400,000 subscribers.
The company warned, however, that it now expects its subscriber base to grow about 16 percent from a year ago, compared with its previous expectation of 20 percent, due to the slowdown in subscriber growth throughout the industry.
The wireless industry has been seeing slowing subscriber growth as the market grows saturated and it is harder to add new customers. Nearly half of Americans now own cell phones.
Shares of AT&T were off US$0.72, or about 8 percent, at US$8.80 at the end of regular trading on the New York Stock Exchange, its lowest close since the break-up of the Bell monopoly in the early 1980s.
Shares of AT&T Wireless slipped US$0.55, or about 9 percent, to US$5.35, also on the NYSE.
Telecommunications equipment maker Lucent posted a US$7.91 billion net loss, including a large noncash charge, also on Tuesday. It said it would have to cut another 7,000 jobs because the telecom spending slowdown had not relented.
"There's no reason to believe right now from these results that the [telecom] industry has stabilized," telecom industry analyst Tom Lauria said.
SBC Communications, the No. 2 US local telephone company that dominates the Midwest and Southwest, was less than optimistic in its outlook.
Battling lower spending by customers and competition in local phone markets, SBC on Tuesday said it earned US$1.8 billion, compared with US$2.1 billion a year earlier. It said it expects such trends to continue in the near term and expects full-year earnings below Wall Street forecasts.
It also said its results were hurt by an US$84 million reserve related to the WorldCom bankruptcy.
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