AT&T Cites Competitive Pressures, Lower Earnings

Citing continued declines in long distance (LD) voice and data revenue, AT&T reported Q1 consolidated revenue of $8.0 billion, a decline of 11.1% versus the first quarter of 2003. The declines were partially offset by AT&T Consumer's bundled local and LD offering, as well as growth in several key markets of AT&T Business.



Operating income totaled $281 million, resulting in a consolidated operating margin of 3.5%. Operating income included $213 million of net restructuring and other charges taken during the quarter related to streamlining of the company's real estate assets as well as employee separations.



Net income was $304 million, or earnings per diluted share of $0.38, including a tax benefit related to a prior investment, losses on the early retirement of debt and net restructuring and other charges. This compares to net income of $571 million, or earnings per diluted share of $0.73, in Q1 2003 -- a fall of 47%.



AT&T Business recorded revenue of $5.9 billion, a decline of 9.1% from the prior-year first quarter. Pricing pressure, competition and demand weakness in retail LD voice and data negatively affected the unit's revenue performance. Declines were partially offset by growth in revenue from local voice and Internet Protocol & Enhanced-services (IP&E) revenue. Data revenue declined 10.1% from the prior-year first quarter. Growth rates were negatively affected by pricing pressure, competitive losses, weak demand and technology migration. IP&E-services revenue grew 5.9% over the prior-year first quarter. Growth for the first quarter was primarily driven by strength in advanced services, including Enhanced Virtual Private Network and IP-enabled frame.



AT&T Consumer recorded revenue was $2.1 billion, a decline of 16.2% versus the prior-year first quarter, driven by lower standalone LD voice revenue as a result of the continued impact of competition, wireless and Internet substitution and customer migration to lower-priced products and calling plans, partially offset by targeted price increases. These revenue declines were also partially offset by growth in bundled revenue which grew by 52% compared to the prior-yearhttp://www.att.com