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Phone firms profit, but upswing elusive

Profits are back in vogue at some of America's major telephone companies, but analysts say that doesn't mean the long-awaited industry turnaround is finally happening.

Profits are back in vogue at some of America's major telephone companies, but analysts say that doesn't mean the long-awaited industry turnaround is finally happening.

In a barrage of financial filings Tuesday and Wednesday, many major landline or cell phone service providers, including AT&T and Bellsouth, reported a profit for the first three months of the year, compared with losses from the same period in 2002.

But in nearly every case, the good news was tempered by dipping or disappointing revenues. For instance, AT&T said Wednesday that its $9 billion in revenues for the quarter was down about 5.9 percent from a year ago, despite earnings that were 4 cents a share higher than what Wall Street expected. Bellsouth's $5.53 billion in consolidated revenues was $100 million lower than the same period in 2002.

Landline phone companies kept pace with Wall Street expectations because of cost-cutting measures like staff reductions and because they sold more broadband services during the just-completed quarter. Wireless phone service providers say they saw a healthier appetite from lucrative business customers.

The telephone industry has been battered for two years by slumping phone sales, cutthroat price competition and worsening debt loads. But signs of new life started to appear late last year. In December, many cell phone companies surprised themselves by reporting subscriber gains for the year. On Wednesday, AT&T added another hint of a turnaround by proclaiming that it expects to meet or beat analysts' expectations for the year.

Still, "just because you start to see turnaround, don't assume it will continue," said Keith Waryas, a telephone analyst with IDC.

Aside from AT&T and Bellsouth, both Nextel Communications and Cingular Wireless reported first-quarter earnings Wednesday. Like their landline brethren, these wireless carriers showed signs of life mixed with signs of caution.

Nextel had perhaps the best quarter of any phone company. It posted a profit, versus a loss from the same period last year. The company also said it added 480,000 new customers and had earnings per share of 20 cents, about 4 cents higher than many analysts expected.

Cingular Wireless, jointly owned by Bellsouth and SBC Communications, added about 190,000 new customers during the quarter, well exceeding analysts' more modest expectations of between 10,000 and 23,000 new customers. But despite the better-than-expected customer adds, wireless revenue was up only slightly, from $3.54 billion to $3.55 billion.