AT&T 1Q Touts DSL, Demurs on Lightspeed

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AT&T Inc. banked on strong business from broadband and its stake in Cingular Wireless, posting increased earnings per share and revenue in the first quarter despite a drop in overall voice-access lines.

But the earnings were also notable for what they lacked -- updates on AT&T’s Project Lightspeed fiber-to-the-node buildout or the U-verse TV service now in controlled market trial in San Antonio.

When contacted, an AT&T spokesman said the company had given a detailed overview during its Jan. 31 investor’s conference, and due to time constraints, earnings information was given in lieu of an update on Project Lightspeed.

Overall, revenue came in at $15.8 billion, a 54% jump compared with the $10.2 billion pre-merger total AT&T Corp. and SBC Communications Inc. combined posted in the same quarter last year. Earnings per share were 37 cents, a 37% increase versus 27 cents in the first quarter of 2005.

The quarter did include strong growth for AT&T’s broadband digital-subscriber-line service, which added 511,000 customers and now reaches more than 7.4 million subscribers. Overall, AT&T’s average DSL penetration across its markets stands at 27.7%. In its best regional market of California and Nevada, penetration is 33%.

In consumer DSL, speed appears to be the driver. Senior executive vice president and chief financial officer Rick Lindner noted that AT&T has seen success in upselling existing customers from lower-speed to higher-speed DSL tiers. AT&T plans to announce a new consumer DSL service offering 6 megabits per second downstream later this week.

AT&T’s results were also boosted by revenue from its 60% stake in Cingular Wireless, which added 1.7 million customers for the quarter.

But as with proposed merger partner BellSouth Corp., AT&T did see a drop in residential voice lines for the quarter, losing 267,000 regional retail consumer lines. That contributed to a drop in wireline revenues from $15.6 billion in the first quarter of 2005 to $14.7 billion in the first quarter of this year.

Lindner noted during the conference call that AT&T did expect line losses this quarter “due to fairly full cable entry -- in our territories, primarily, that was from Time Warner [Cable] and Comcast [Corp.].”

But he also downplayed the long-term impact from cable-telephony competition, noting that it comes into play in AT&T’s regional consumer business totaling 16% of the company’s revenue.

Of that, if one cuts out the customers who have service bundles with AT&T voice, DSL and EchoStar Communications Corp. Dish Network direct-broadcast satellite service -- who are therefore unlikely to move over to cable competitors -- “pretty soon, you start to get down to a total that is at risk of no more than one-third of that total consumer base,” he added.

AT&T is working to entice its at-risk voice-only customers to buy into data and satellite-TV bundles, but in a lot of respects, the discussion about cable competition “is somewhat overblown,” Lindner said.

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