SBC Posts a Softer Third Quarter

Third-quarter earnings slipped at SBC (SBC - Cramer's Take - Stockpickr) as the San Antonio-based telco continues to contend with an eroding landline phone business.

For the quarter ended Sept. 30, the company posted earnings of $1.2 billion, or 37 cents a share, down from $1.7 billion, or 51 cents a share, a year earlier. Revenue slipped to $10.2 billion from $10.6 billion a year earlier. Results don't include numbers from the company's 60%-owned Cingular wireless venture, which Monday evening posted third-quarter revenue of $4 billion.

SBC said the third quarter showed some progress in slowing the softening of its main phone business. The company said it lost 40% fewer consumer retail access lines in long-distance states against a year ago. The company also said 36% customers had bought long distance, digital subscriber line or wireless "bundles," up from 19% at the end of 2002.

SBC added 365,000 net new DSL lines during the third quarter -- up 20% from net adds in the prior quarter -- bringing total high-speed Internet lines to 3.1 million. The company added 1.7 million long-distance lines in the third quarter, bringing its total to 11.5 million, nearly double year-ago levels and up 17% from the second quarter. The company said long-distance gains in the Midwest should help reduce access-line losses.

Meanwhile, for the third quarter, Cingular Wireless further accelerated subscriber growth with its best gain in more than two years, adding 745,000 net new subscribers.

Like its peers in the wireline telecom business, SBC has been fighting a steep erosion in its core business for years. The company's revenue has been stagnant in recent quarters, forcing SBC to become the most aggressive of its Baby Bell peer group in slashing expenses to squeeze out greater efficiency.

But the news hasn't been all bad at SBC, which this summer pleased thrift-minded investors by boosting its dividend.

On Monday, SBC shares rose 40 cents to $22.40.