AT&T Wireless Reports Weak Quarterly Results

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AT&T Wireless Reports
Weak Quarterly Results

Carrier Formally Announces
Plans to Explore Possible Sale
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP


AT&T Wireless Services Inc. posted weak fourth-quarter results, blaming higher-than-expected costs tied to local number portability and serious software problems, as the company formally announced it is exploring a possible sale.


In a statement early Thursday, the No. 3 U.S. wireless carrier said it made the decision to explore a sale as a result of "significant interest from a number of other companies, as well as global and domestic industry dynamics." In a morning conference call, Chairman and Chief Executive John Zeglis said the company has no timeline for evaluating offers, and will do so "deliberately" and "thoroughly."

Early Thursday, shares of AT&T Wireless were down 16 cents, or 1.6%, to $10.83 on the New York Stock Exchange, after rising 5.8% Wednesday.

The Redmond, Wash., company reported a fourth-quarter net loss of $84 million, or three cents a share, compared with a loss of $131 million, or five cents a share, in the same quarter last year.

Analysts surveyed by Thomson First Call were expecting a break-even quarter.

Several key metrics looked weak. Operating income before depreciation and amortization, or Oibda, was $890 million, down 2.6% from a year earlier. Also, Oibda margins fell to 22.8% from 24.4% a year earlier.

The company said the decline in Oibda was due in part to by expected costs, such as a new advertising campaign, support of local number portability and additional restructuring charges. But the company also said it encountered unexpected problems in the quarter, including higher-than-expected costs for local number portability and glitches in a new customer-relationship-management software platform. (Local number portability, which started in November, allows customers to keep their phone numbers when they switch carriers.)

"We did hit some operational rough spots in the fourth quarter, but the good news is that those issues are largely behind us," said Mr. Zeglis.


Revenue rose 4.1% to $4.22 billion from $4.05 billion in the year-earlier period. Services revenue was up 4.4%, while equipment revenue edged up 0.5%. Analysts were expecting the company to post revenue of $4.24 billion.

AT&T Wireless said net subscriber additions were 128,000 for the quarter and 1.06 million for the year, bringing the company's total consolidated customer base to 22 million, an increase of 5.4% from 2002.

Average revenue per user per month was $58.70 for the fourth quarter, down 2.2% from $60 a year earlier. Fourth-quarter churn was 3.3%.

The company has garnered a lot of interest in recent weeks as it courts potential suitors, which include Cingular Wireless and Japan's NTT DoCoMo Inc., according to people close to the situation. The potential sale suggests that the eagerly awaited consolidation of the U.S. wireless industry may be at hand.

Merrill Lynch & Co. and Wachtell Lipton Rosen & Katz will serve as advisers to AT&T Wireless in the evaluation of options. The company noted, however, that it can't provide assurances that a deal will occur.

AT&T Wireless reported results before the opening bell Thursday. Shares were up 60 cents, or 5.8%, to $10.99 in 4 p.m. trading on the New York Stock Exchange Wednesday.