The phone giant said about half of the "employee separations" will come from management. Most of the workers will leave the company in the first half of 2003. The charge should cut fourth-quarter earnings per share by about 20 cents, AT&T said.
The cuts will come primarily from AT&T's Business division, a company representative said. That division also includes AT&T Network and Labs. AT&T has around 72,000 employees worldwide.
The telecommunications company said separately Monday that it had extended an agreement with Covad Communications to use Covad's network for its ISP business. Related to that deal, AT&T will take an asset-impairment charge of around $200 million, or about 15 cents per share, in the fourth quarter.
Analysts had been expecting AT&T to record a profit of $9.2 billion, or 66 cents per share, in the fourth quarter.
Covad provides service for AT&T in a few targeted areas; AT&T offers digital subscriber line service over its own network in parts of New York, Texas and California. AT&T will now market its WorldNet service to Covad's nationwide network, which covers more than 40 million homes and businesses in the United States.
The agreement covering consumer services runs through Sept. 1, 2005. Specific financial terms were not released.
"Broadband Internet access is a key element in the portfolio of services we want to offer consumers," Kevin Crull, senior vice president for AT&T Consumer, a local service provider, said in a release. "Collaborating with Covad greatly expands our options and geographic reach."
AT&T's broadband business has been. The company reported that revenue for that business rose 8.2 percent on a pro forma basis in the third quarter to $2.5 billion. Revenue growth was mainly driven by advanced services such as high-speed data and digital video.