SBC ( SBC) handily beat earnings estimates Wednesday as strong performances in its fast Internet access and long-distance businesses offset continuing losses in its core local phone operation.

For its first quarter ended March 31, the San Antonio-based telco posted earnings of $1.9 billion, or 59 cents a share. The latest quarter included a 22-cent gain on the sale of a stake in a foreign telecom operator. Excluding the gain, the first-quarter earnings amounted to 37 cents a share, 6 cents better than the Wall Street analyst consensus estimate listed by Thomson First Call.

Revenue was flat at $10.1 billion. A year ago, the company earned $2.5 billion, or 74 cents a share, again including a large gain on the disposition of noncore assets.

"We delivered very strong execution across our key growth initiatives," said CEO Ed Whitacre. "In the first quarter, SBC achieved the best DSL line gain our industry has seen. Our long-distance growth continued at a fast pace. We deepened our bundle penetration. And as we drove growth in all these areas, we improved margins from fourth-quarter 2003 levels, exceeding the outlook we provided in January."

The company said it gained 446,000 digital subscriber line, or DSL, customers in the first quarter, its strongest-ever showing in the broadband business it shares with Net giant Yahoo! ( YHOO). SBC also added 2.6 million long-distance lines to reach 17 million in service, more than double its year-ago total.

The company said more customers were choosing so-called bundles of more than one service from SBC, and that the shift toward bundling had slowed the loss of its consumer local phone lines. SBC lost 305,000 consumer retail access lines in the latest quarter vs. declines of 748,000 in the year-ago first quarter and 424,000 in the fourth quarter.

SBC's operating income margin improved in the first quarter to 15.5% from 12% in the preceding quarter. The improvement reflects a drop in operating costs driven by declines in pension and benefit expenses.

SBC shares were recently up 31 cents, or 1.3%, to $24.67.

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