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SBC tops estimates in 3Q

SBC Communications (NYSE: SBC), one of the recent additions to the Dow Jones industrial average, reported Wednesday pro forma operating earnings of 57 cents a share in the third quarter. The results include the operations of Ameritech, which closed Oct. 8.

At first glance it would appear that SBC missed First Call consensus estimates of a 61 cents a share profit. But Guy Woodlief, an analyst at Prudential Securities, said the consensus was based on SBC as a stand-alone company. In that case, SBC topped estimates with operating earnings of 64 cents a share.

SBC, which will enter the Dow Industrials on Monday, combined the results of Ameritech in its report.

Here are the results including Ameritech as if the deal closed in the third quarter: The new SBC reported earnings of $2 billion, or 57 cents a share, on revenue of $12.5 billion. In the same quarter a year ago, the combined companies would have reported earnings of $1.7 billion, or 49 cents a share, on sales of $11.4 billion.

On a pro forma basis revenue growth would have been 9.4 percent year over year. The results excluded merger charges.

SBC as a stand-alone company reported operating earnings of $1.3 billion, or 64 cents a share on revenue of $7.8 billion. Revenue was up 7.6 percent and earnings were up more than 20 percent compared to a year ago. Including one-time items, SBC reported earnings of $1.1 billion, or 33 cents a share.

The primary one-time items include a $883 million, or 25 cents a share, charge related to the Ameritech merger and the sale of non-core business, the company said.

Going forward, SBC said it will be able to cut costs with the Ameritech acquisition complete. The company announced an initiative to allow SBC to provide high-speed Digital Subscriber Line (DSL) service 80 percent of its customers by the end of 2002. SBC said it will invest $6 billion over the next three years to convert its local network into broadband platform. The move is expected to generate $1.5 billion in annual cost savings and $3.5 billion in new annual revenue within five years.

"We are moving forward rapidly with post-merger integration and expect the first phase of the process to be completed this year,'' the company said in a statement.

On a pro forma basis, data services sales increased 43.4 percent compared to a year ago to $1.5 billion; SBC's international holdings contributed more than 20 percent of the company's normalized pre-tax earnings growth; and total wireless subscriber revenue increased 25 percent.