- The Washington Times - Monday, April 20, 2009

NEW YORK (AP) - AT&T; Inc. reports its first-quarter results on Wednesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: The largest telecommunications company in the country is expected to post relatively steady results for the first quarter, fulfilling its role as a safe haven in stormy times.

But pension liabilities and a shrinking base of local-phone subscribers have left investors little to be excited about in the quarter. For telecom investors, the success story so far this year have been shares of competitor Sprint Nextel Corp., which have doubled in value.

Shares of Verizon Communications Inc., which is more similar to AT&T; in that it still has a landline business, have also been doing better. By investing heavily in optical fiber, Verizon has managed to stem the decline in consumer landline revenue, which AT&T; has not.

AT&T;’s growth driver has been its wireless business. Its position as the sole carrier for Apple Inc.’s iPhone has attracted high-paying subscribers. But iPhone sales are likely to be down from the fourth quarter, and a new model that can rekindle interest isn’t expected until the summer.

The wireless business is also shifting toward cheaper prepaid services. Analysts expect they will attract more customers than traditional contract-based “postpaid” plans this year, for the first time, since nearly everyone who can afford to sign up for a contract already has. AT&T; has a minor prepaid service of its own, but also sells wholesale minutes to America Movil SA, the Mexico-based parent of the largest prepaid service in the U.S., Tracfone.

Tracfone customers spend an average of $10 per month, one tenth of what an iPhone owner spends, so an increase in new prepaid subscribers is worth much less to AT&T; than new postpaid customers.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect the company to earn 48 cents per share excluding items on $31.1 billion in revenue. In the year-ago period, AT&T; recorded profit of 74 cents per share.

ANALYST TAKE: UBS analyst John Hodulik believes AT&T; will sign a net 800,000 new customers to wireless contracts, and doesn’t think new unlimited-calling prepaid plans from competitors had much impact.

Craig Moffett at Sanford Bernstein will be looking for evidence that the new plans are stealing customers. He expects AT&T; to report 712,000 net new customers under contract. That would still be comparable to the same quarter last year, when AT&T; added 705,000 new contract customers.

Moffett also expects the loss of 1 million landlines. The big unknown, he wrote Monday, is AT&T;’s enterprise business, which provides services for corporations and big institutions. It’s not clear how strongly this business will be affected by the economic downturn, he said.

Standard & Poor’s Ratings Services lowered its long-term outlook on AT&T;’s debt to “negative” from “stable” a month ago, saying its high debt level leaves little room for additional borrowing. The debt is the result of declines in the market value of its pension funds, and due to spectrum purchases for the wireless business.

WHAT’S AHEAD: AT&T; is negotiating a batch of expired labor contracts covering 80,500 to 90,000 workers on the wireline side. The expiration of the five-year contracts has come at a bad time for unions, and the company is trying to wring concessions from workers to reduce its health care costs.

Verizon Communications Inc., AT&T;’s largest rival, reports fourth-quarter results on Monday. Verizon Wireless surpassed AT&T; as the largest wireless carrier in the country on Jan. 9, when its purchase of Alltel Corp. closed.

STOCK PERFORMANCE: AT&T; shares fell 11 percent in the first quarter, closely tracking the S&P; 500.

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