Update: Broadband, wireless drive AT&T profit

AT&T on Tuesday reported net income of $1.45 billion for the first quarter of 2006, a small increase over the combined net incomes reported a year ago by the old AT&T and SBC, the two companies that merged in November.

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The old AT&T and SBC had a combined pro forma net income of $1.32 billion during the first quarter of 2005, and using those numbers, net income grew nearly 10 percent year over year.

In its financial statement, the new AT&T compares its latest quarterly results to SBC's numbers from the first quarter of 2005. Using that comparison, year-over-year net income rose more than 63 percent, from SBC's $885 million. SBC acquired the old AT&T in a deal worth about $16 billion.

The company compared the new AT&T's results to SBC's because that's in line with GAAP (Generally Accepted Accounting Principles), said AT&T spokeswoman Anne Vincent. AT&T published the pro forma combined results earlier this month.

The new AT&T posted operating revenue of $15.84 billion during the first quarter of this year, which ended March 31. That's an increase of nearly 55 percent from SBC's reported revenue of $10.25 billion a year ago.

But the new AT&T's revenue is down about $900 million, or about 5 percent, when compared to the combined pro forma revenue of SBC and the old AT&T in the first quarter of 2005.

The new AT&T posted earnings per share of $0.52 this past quarter, while analysts polled by Thomson Financial expected earnings of $0.48 per share. Taking out merger-related costs, earnings per share were $0.37 this quarter.

"As you can see, we've had a very good quarter," said Rick Linder, AT&T's senior vice president and chief financial officer. The company expects to return to overall revenue growth in 2007, he said.

The new AT&T is on track to achieve merger-related cost-cutting goals of $600 million to $800 million this year, Ed Whitacre, AT&T chairman and chief executive officer, said in a press release. In addition, he said, the company is moving ahead with its plan to acquire rival telecom carrier BellSouth, a move announced in March.

AT&T expects a shareholder vote on the BellSouth merger around mid-year, company officials said.

Among the quarterly highlights, AT&T reported:

-- A 1.7 million net growth in subscribers at Cingular Wireless, the wireless carrier AT&T co-owns with BellSouth. Cingular now has 55.8 million subscribers, and Cingular's revenue grew more than 9 percent to $9 billion.

-- IP (Internet Protocol) data revenue, including DSL, dedicated Internet access and other services, increased 14 percent from the first quarter of 2005. An increase of 511,000 regional DSL (Digital Subscriber Lone) connections, raising the number of lines in service to 7.4 million.

-- Enterprise revenue was down 6.9 percent from a year ago, but in the fourth quarter, they were down 9 percent from a year earlier, AT&T said. Enterprise services are moving toward profitability, Linder said.

-- Mass-market revenue, including stand-alone long distance and bundled services for consumers and small businesses, were down more than 27 percent year over year. Residential long distance continues to face significant price competition in the telecom industry, analysts say.