Wireless boosts profits for Cingular's parents

AT&T, BellSouth both reported profit growth due largely to their stakes in mobile operator Cingular Wireless.

2 min read
Mobile operator Cingular Wireless is boosting profits for its parent companies, AT&T and BellSouth.

On Tuesday, BellSouth reported that its 40 percent stake in Cingular helped increase its profits by almost 30 percent in the third quarter. Earnings for the telecom company grew to $1.06 billion for the quarter, up from $817 million for the same period last year. AT&T, which reported third-quarter earnings on Monday, said its 60 percent stake in Cingular significantly contributed to its $2.4 billion profit.

Cingular, which reported earnings last week, more than tripled its net income to $847 million in the third quarter, up from $222 million a year ago. Revenue increased 9 percent to $9.55 billion. The mobile operator added 1.4 million new customers to bring its total user base to 58.7 million. It also reduced the number of people who leave its service every month.

Cingular's consistent, strong growth and its promise of continued strong growth are significant drivers in AT&T's quest to buy BellSouth. The companies announced their merger in March, which was then valued at about $67 billion. Today it's estimated to be worth roughly $80 billion.

AT&T and BellSouth face stiff competition in their wireline businesses. Cable companies are threatening their high-speed Internet businesses, as well as their local and long-distance phone businesses.

BellSouth on Tuesday said that its total access lines, including those for phone service and high-speed Internet access, declined 6.9 percent from the previous year to 19 million at the end of the third quarter. The company lost about 301,000 local phone lines.

But BellSouth did grow its DSL subscriber business. The company signed up about 176,000 new DSL customers, not quite meeting targets set by some analysts who had hoped for a big quarter as college students returned to school.

Once combined, AT&T and BellSouth would dominate wireline service in 22 states in a service area stretching from Florida to California. And the new AT&T would be able to count Cingular's profits as its own, also giving the company a further boost.

The merger is expected to close by the end of the year. The Department of Justice has already approved the deal without any conditions. But the Federal Communications Commission's decision on the merger, which is its last regulatory hurdle, has been postponed until Nov. 3 after the FCC's two Democratic commissioners asked for more time to study a last-minute proposal offered by AT&T. Request for public comment on AT&T's latest proposal ends Tuesday.