AT&T reported Q3 revenue of $6.3 billion, a decline of 6.2% from the same period last year, due to pricing pressure, weakness in retail long distance (LD) and data demand, and weak overall telecommunications spending. The declines were partially offset by growth in wholesale volumes, local voice and IP&E-services revenue. In its quarterly report, AT&T also noted that the liability on its balance sheet relating to costs incurred in 2001 and 2002 pertaining to access and other connection expenses was understated by $125 million. The company said two employees, one lower-level and one mid-level management employee, "circumvented its internal controls process" and that personnel changes have since been made.
Some highlights of Q3 2003:
- income from continuing operations was $458 million, or earnings per diluted share of $0.58, for Q3 2003.
- long distance voice revenue declined 10.5% on a quarter-over-quarter basis, driven by continued pricing pressure, partially offset by volume growth. Volumes grew nearly 15% on a quarter-over-quarter basis, driven by strong wholesale growth, which more than offset the decline in retail volumes.
- local voice revenue grew approximately 38% and local access lines totaled over 4.3 million at the end of the current period, representing an increase of almost 97,000 lines from Q2 2003.
- IP&E-services revenue grew 13%, while data service revenues declined 6.5%
- the managed component of total data services and IP&E-services revenue grew about 10% from the prior year third quarter and now comprises approximately 33%.
- Operating income totaled $417 million. Operating margin was 6.6%, compared with 12.7% in the prior year
- revenue for AT&T Consumer Services was $2.4 billion, a decline of 16% versus the prior year third quarter, driven by lower LD revenue as a result of the continued impact of competition, wireless and Internet substitution, and customer migration to lower priced products and calling plans. Bundled revenue grew by 77% percent compared to the prior year third quarter, and now represents over 22% of AT&T Consumer Services' total revenue.
- Free cash flow was $2.0 billion for the third quarter, which included $0.6 billion of tax refunds.
