AT&T to record $10 billion charge in fourth quarter
The company expects a pretax loss due to changes in pension and post-employment plans and abandonment of certain copper assets.
AT&T expects to record a pretax loss of $10 billion in the fourth quarter because its former employees are living longer and certain copper assets have been abandoned.
AT&T's results will include a $7.9 billion charge partly due to costs incurred by changes in its pension and post-employment plans due to "updated mortality assumptions," the telecommunications giant revealed in a regulatory filing Friday. The company also said it decreased the rate it uses to measure its pension obligations.
The changes come as retirees are living longer than they did a decade ago. The Society of Actuaries, which helps businesses manage financial risk, updated its mortality tables in October to reflect people older than 65 living two years longer in 2014 than they did in 2000. That greater life longevity results in larger contributions than previously estimated to pension plans to cover the extra years.
AT&T has been stung by changes to its pension plans before. Three years ago, the company took a fourth-quarter loss of $6.7 billion due largely to a change in how it accounts for its employee pension benefits and the breakup fee it was required to pay after scrapping its bid to buy T-Mobile USA.
The Dallas-based company will also take a $2.1 billion non-cash charge after deciding to abandon certain copper assets deemed unnecessary for future network activity as customer demand for older voice and data products declines. Telecommunications companies have been replacing the copper wiring in their networks with fiber-optic lines, which can reach longer distances and offer much higher data rates.
The actuarial loss was partially offset by higher asset gains than expected and will not affect the company's operating results and margins. AT&T recorded $33.25 billion in revenue in the third quarter and is expected to post revenue of $34.68 billion in the fourth quarter, according to Thomson Reuters consensus estimates.
The company is scheduled to report its fourth-quarter financial results on January 27.