SBC 4Q earnings on target

Larry Dignan
3 min read

SBC Communications (NYSE: SBC) hit Wall Street estimates Tuesday with operating earnings of $1.9 billion, or 54 cents a share, on sales of $12.9 billion. SBC, one of the recent tech additions to the Dow Jones industrial average, also has big expansion plans.

The company said it will introduce service in nine new markets in 2000, and another 21 during the following two years. The company expects the initiative to add an incremental $1 billion in revenue by 2002.

The telecommunications giant is the latest to report strong results. AT&T Corp. (NYSE: T) topped estimates Tuesday and Bell Atlantic (NYSE: BEL) and BellSouth (NYSE: BLS) reported solid quarters on Monday. Local Bells are beginning to gain access to the long distance markets and long distance giants such as MCI WorldCom (Nasdaq: WCOM) are offering local service in what is shaping up to be a battle royal.

SBC, which recently closed its acquisition of Ameritech, said revenue growth was up 7.9 percent from the fourth quarter a year ago. Earnings were up 8 percent from a year ago. Including one-time items such as gains from the sale of Ameritech assets and charges, SBC's reported fourth quarter net income of $3.1 billion, or 90 cents a share, compared with $1.5 billion, or 44 cents a share, in 1998.

SBC said its integration of Ameritech is "ahead of schedule." The company projected $1.4 billion in net income from merger synergies in 2003, but "expects to achieve greater benefits and realize them sooner than projected."

Edward E. Whitacre Jr., CEO of SBC, said the company's Project Pronto, a $6 billion initiative roll out high-speed Internet access to its 53 million customers is also off to a strong start.

"We are moving closer to our goal of becoming the only communications company our customers will ever need,'' Whitacre said, in a statement. "Once we receive federal regulatory approval, SBC will add long distance to its comprehensive communications solutions which today include local, wireless, high-speed Internet access and satellite television.''

SBC said expects to deliver earnings growth of at least 15 percent, and double-digit revenue growth beginning in 2001.

In the fourth quarter, SBC's data services revenue jumped 44 percent to $1.6 billion. The company said growth was fueled by strong demand for high-speed data transport services and its data communications services, which include applications, network integration services and Internet services. SBC sold digital subscriber line (DSL) service to 70,000 customers during the fourth quarter, and 169,000 for the full year.

The company said its wireless unit also had strong gains. Subscriber revenue was up 25.2 percent compared with the fourth quarter a year ago. Over the past year, SBC's domestic wireless subscribers increased 28.4 percent to 11.2 million, including strategic acquisitions made during the third quarter.

On the international front, SBC also has nice gains in its portfolio. Fourth-quarter pre-tax income from SBC's international investments increased 22.8 percent over the comparable quarter a year ago. On a proportionate ownership basis, 1999 total revenue reported by SBC's international holdings increased 39 percent to $6.8 billion. SBC owns a stake in Bell Canada and has partnerships with Telmex and Tele Danmark.

For 1999, SBC reported operating earnings $7.4 billion, or $2.15 a share, on sales of 49 percent. Earnings were up 12.5 percent from a year ago and sales jumped 8 percent. Including one-time items, SBC earned $8.2 billion, or $2.36 a share.