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SBC cites revenue slip, DSL gains

The Baby Bell says it has signed up more than 2 million people for its broadband service, taking some of the sting out of a 5 percent drop in revenue for the third quarter.

SBC Communications has signed up more than 2 million people for its broadband service, the company said Thursday, announcing that its third-quarter revenue had slipped.

In September, the Baby Bell launched a DSL (digital subscriber line) service through a partnership with Internet portal Yahoo. SBC said Thursday that it added 226,000 DSL subscribers in the third quarter, bringing its total base up to 1.95 million, 65 percent higher than a year ago. The company said the total figure has passed 2 million since then.

"Despite a tough regulatory and economic environment, we delivered exceptional results adding DSL Internet subscribers, primarily as a result of effective marketing initiatives and the introduction of SBC Yahoo DSL service," CEO Edward Whitacre said in a release.

But not all was bright in SBC's world during the third quarter, which ended Sept. 30.

The telecommunications company saw revenue drop around 5 percent from a year ago, from $13.5 billion to $12.8 billion. That includes proportionate revenue from Cingular Wireless, in which SBC has a 60 percent stake.

SBC's pro forma income for the quarter was $1.7 billion, or 51 cents per share, excluding special items. That's down from $2 billion, or 59 cents per share, in the year-ago quarter, and below the 54 cents per share analysts were looking for, according to a First Call survey.

Net income for the San Antonio, Texas, company during the quarter was $1.8 billion, or 53 cents per share, including an after-tax charge of $125 million for severance costs and a $212 million gain in equity income.

SBC reaffirmed its outlook for the full fiscal year, saying it still expects to report a profit of $2.26 per share before special items. In September, the company had cautioned that a weak economy was hampering sales, saying at the time that it expected to eliminate 11,000 jobs and trim capital spending.

Whitacre complained in a press release about new regulations that require telecom carriers to sell unbundled parts of their networks to rivals. SBC said it lost 751,000 local telephone lines to competitors who leased components of its network to provide service.

"We continue to respond aggressively by reducing costs. But no amount of cost-cutting can offset the effects of rules that require us to sell our lines and related services to competitors below cost," he said in the release.

SBC also said that it added 318,000 long-distance lines, bringing its total to 5.9 million. It hopes to get approval to offer long-distance services in California by the end of the year.