Sales Erosion Wears Thin at SBC, AT&T

Wall Street showed its scorn for two big names in telecom Tuesday, as it surveyed a bleak landscape at erosion-scarred AT&T (T) and SBC (SBC).

First up was AT&T, the New York long-distance giant that has emerged as perhaps the most feckless participant in a years-long industrywide downhill sales slalom. The company surprised no one by noting a 16% decline in third-quarter revenue at its staggering consumer business. But observers were less than pleased with the quarter's 6% drop in business services revenue and the attending 2003 forecast for that once-stout unit. Worries about pricing pressure pushed AT&T down $1 to $20.07

Meanwhile, San Antonio local-phone leader SBC offered up its own soggy quarter, posting sharp drops in earnings and revenue from year-ago levels amid a worrisome decline in local access lines. Clutching at positive straws, the company noted the strong growth of its Cingular wireless venture and a companywide sequential sales rise in the latest period. But investors weren't impressed, sending the stock down 88 cents to $21.52.

The weak performances came as the telecom business continues to struggle through a massive shift in customer preferences. Users have fled the old-line telcos in droves in favor of wireless carriers such as Cingular, Verizon Wireless and Nextel (NXTL). Now the challenge grows thornier as the companies must try to alleviate ongoing problems -- like SBC's line losses -- while facing down new setbacks, such as the one at AT&T's venerable business services unit.

Price Wars

Though AT&T didn't alter its full-year guidance, executives on a conference call with analysts said increased price pressure and continued weak demand for business services will drive fourth-quarter sales declines. The setback will be steep enough that the company will suffer a deeper 2003 sales decline than it endured in 2002, when business sales dropped 4%.