AT&T Corp. (NYSE: T) said Tuesday that revenue and earnings growth will be down from previous guidance for fiscal 2000 as long distance sales decline at a faster rate.
On a conference call with analysts, CEO C. Michael Armstrong said lagging long distance revenue would hurt the sales outlook for the year. Armstrong had projected a 3 percent to 5 percent fall in long distance revenue, but said the decline will probably be 5 percent to 7 percent.
Long distance revenue could decline 6 percent to 8 percent because of new calling charges initiatives proposed by AT&T and others. The changes are expected to take effect in July.
Armstrong said long distance revenue was declining at a faster pace as customers transitioned to new technology (calling cards to wireless) and migrate to new calling plans. The company is also "losing share with low value customers."
Because of the long distance sales decline, AT&T is likely to grow sales at a 7 percent to 8 percent rate for fiscal 2000. Sales growth of 6 percent to 7 percent is possible because of changes in calling charges. The changes will cut some of AT&T's fees.
Armstrong had projected fiscal 2000 revenue growth of 8 percent to 9 percent. The AT&T chief also said business sales were off to a slower-than-expected start. Business sales will grow about 8 percent in fiscal 2000, down from guidance of 11 percent.
Because of the long distance sales growth and the mid-year closing of the Media One (NYSE: UMG) acquisition, Armstrong said fiscal 2000 operating earnings will be in the $1.87 to $1.92 a share range. Current First Call Corp. estimates project earnings of $2.08 a share in 2000, but may not include dilution from recent deals. Armstrong said AT&T projected annual earnings of $2.10 to $2.15 without dilution and $1.89 to $1.99 including dilution.
Fiscal 2000 earnings could be in the $1.80 to $1.85 range, adjusted for the new calling charges regulation.
In line quarter
AT&T reported first quarter operating earnings of $1.73 billion, or 53 cents a share, on sales of $15.8 billion. The earnings were down from a year ago, but in line with Wall Street estimates.
Earnings tracking firm First Call Corp. predicted a profit of 53 cents a share.
AT&T's operating earnings exclude gains, charges and other ownership interests. Including those items, AT&T reported earnings of $1.74 billion, or 54 cents a share. The results were down from earnings of $1.72 billion, or 61 cents a share, a year ago. The company said the earnings were lower because of the acquisition of cable company TCI and a higher shares outstanding count.
Revenue for the quarter ending March 31 was up 5.8 percent to $15.8 billion, compared to $14.97 billion a year ago.
It was a standard quarter for AT&T -- good growth in business services, wireless and broadband was offset by fierce competition in the consumer long distance market.
New businesses gain
The company said wireless revenue, tracked by Ma Bell's AT&T Wireless (NYSE: AWE) stock, was up 40 percent. In AT&T's business services unit, high speed data and Internet protocol revenue grew at "a high-teen rate" and AT&T Solutions' sales jumped 25 percent. However, business services revenue was up 6 percent overall.
In broadband, AT&T said sales were $1.5 billion, up 7.9 percent from a year ago. It had 2 million digital cable subscribers. The broadband results include Excite@Home (Nasdaq: ATHM) results.
Consumer services, also known as long distance services, remained a drag, with sales of $5.1 billion, down 5.6 percent from a year ago. AT&T said price competition hurt sales, and that many customers are migrating to package deals.
Among other businesses, AT&T said WorldNet Services revenue increased 26.3 percent compared to a year ago. WorldNet has nearly 1.5 million residential subscribers, up 4.5 percent from a year ago.
AT&T has been busy expanding into new markets. The company recently boosted control over Excite@Home. AT&T's stake in Excite@Home, which recently missed estimates, puts it in competition with America Online (NYSE: AOL).
AT&T also boosted its Internet telephony profile by taking a big stake in Net2Phone (Nasdaq: NTOP).