The New York Times-20080125-Changing Tone- AT-T Plays Down Effect of Less Spending
Return to: The_New_York_Times-20080125
Changing Tone, AT&T Plays Down Effect of Less Spending
Heads turned on Wall Street on Thursday as AT&T executives tempered earlier statements about the expected impact of lower consumer and business spending on their business.
On Jan. 8, shares of AT&T slid 4.5 percent after Randall L. Stephenson, the chief executive, said at a conference that some customers were having their phone service turned off because of unpaid bills, indicating a weakening economy. But in a conference call after the release of AT&T's earnings on Thursday, the company played down those concerns.
It emphasized instead the predictable nature of telephone company stocks, which are less vulnerable than those of luxury goods makers or real estate companies during a recession.
Rick Lindner, the chief financial officer, said AT&T, like other communications companies, was indeed seeing the impact of a softer economy on its operations. But, he added, they are not very severe at this point. Even in a downturn, consumers are going to want to stay connected, either online or on the phone. I think for us that continues to point to more of the defensive nature of our business, he said.
AT&T reported strong fourth-quarter earnings that met analysts' expectations, with net income rising 63 percent, in large part because of the growth in wireless communications. Revenue hit $30.3 billion in the quarter ended Dec. 31, up from $15.9 billion for the same period in 2006. The increased revenue reflects AT&T's acquisition of BellSouth and the consolidation of its wireless operations. The company now has 70.1 million customers.
AT&T gained 2.7 million new wireless customers in its fourth quarter, up 13.5 percent from a year earlier, Mr. Lindner said, adding that 40 percent of customers buying Apple's iPhone, which is sold exclusively through AT&T, are new to the company.
Wireless data revenue increased 57.5 percent from a year earlier as customers sent more e-mail messages by phone, downloaded videos and used the Internet on the go.
Analysts say wireless operations will continue to be a driver of growth. But if consumers get worried about the economy and cut nonessential spending, communications companies may see the impact in ways they do not expect.
Lisa Pierce, a vice president for Forrester Research in Cambridge, Mass., said consumers could decide to forgo spending on mobile music and ring-tone downloads. Such services are moneymakers for companies like AT&T, which have watched the number of phone lines installed in homes shrink.
Wireless has been part of the reason that revenues have been growing rapidly, Ms. Pierce said. Those companies want that to keep going.
If consumers do shy away from consuming entertainment on their phones, it could have a ripple effect through the media industry. Industry executives and analysts have been betting on mobile media to follow the trajectory of media on the Internet. As with anything in an uncertain economy, Ms. Pierce said, we'll have to wait and see.
Shares of AT&T fell 94 cents to close at $35.75 and continued falling after hours.
Shake-Up at Sprint
The chief financial officer of Sprint Nextel, Paul N. Saleh, and two other senior executives are leaving the company in a management shake-up, the company said Thursday.
Mr. Saleh, who had served as acting chief executive, will leave Friday along with the chief marketing officer, Timothy E. Kelly, and Mark E. Angelino, president for sales and distribution, Sprint said.
Sprint shares closed up more than 4 percent as some investors saw the departures of the marketing and distribution executives as a good sign. Sprint has struggled with marketing and customer service problems.
The chief executive, Daniel R. Hesse, said he was reviewing strategy and would consider both internal and external candidates for the jobs.
