The struggling telecom industry took another blow Wednesday morning, this time at the hands of

AT&T

(T) - Get Report

.

The big telco posted a

big first-quarter loss and predicted a second-quarter revenue decline Wednesday as the long-distance business continues to falter. But more damaging was the company's plan to slash 2002 capital spending by as much as one-third from year-ago levels.

In cutting back its equipment budget, AT&T becomes only the latest big telco to tighten its belt at the expense of companies further down the telecom food chain, such as networkers

Lucent

(LU)

and

Nortel

(NT)

. With revenue eroding and costs remaining maddeningly high despite widespread job cuts across the industry, long-distance and local-phone giants like AT&T,

Verizon

(VZ) - Get Report

and

SBC

(SBC)

have all trimmed capital spending in recent weeks, further pressuring a capital-gear sector that has taken hit after hit since the Internet boom peaked in 2000.

In the wake of the big selloff of telecom giants such as

WorldCom

this week, as investors worry that the declining inflows won't be enough to service the industry's massive debt, AT&T's remarks are hardly likely to reassure Wall Street. The stock closed Tuesday at $13.85.

Falling
Telecom spending on the decline

Source: BigCharts, Ciena

The capex cutback wasn't the only bad news, of course. AT&T reported a first-quarter loss of 5 cents a share from continuing operations, down from last year's 17-cent loss, as revenue fell 8.4% to $12 billion. The company said it lost 28 cents a share including goodwill-related accounting charges.

AT&T also said second-quarter numbers would show continued deterioration, with revenue falling essentially on pace with first-quarter levels.

Sales to business customers dropped 8% to $6.53 billion, while consumer sales slid 22% to $3.13 billion. AT&T Broadband's pro forma revenue, adjusted for sales and acquisitions of cable assets, rose 13.9% to $2.44 billion. The company agreed earlier this year to sell the broadband operation to

Comcast

.

The company expects second-quarter EPS, excluding other expense/income, to be in the range of a penny to 4 cents a share. On the same basis, the company expects EBITDA to be about $3 billion.