BellSouth Becomes Latest Telco to Cut Capital Spending

The Baby Bell issues earnings guidance and cap-spending plans after the close.
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Yet another big-spending phone company,

BellSouth

(BLS)

, says it will reduce its buying next year, further dampening the prospects for

equipment sellers such as

Cisco

(CSCO) - Get Report

,

Lucent

(LU)

and

Nortel

(NT)

.

The Atlanta-based Baby Bell says it will cut back its spending on network expansion by $500 million. BellSouth, which controls local phone service for nine Southeastern states, says it expects to spend between $5.5 billion and $6 billion next year, down from the $6 billion to $6.5 billion it has predicted it will spend this year.

BellSouth becomes the fourth large telco to say it will spend significantly less next year on such things as telephone switching gear and capacity buildout.

AT&T

(T) - Get Report

expects spending to

level off, while

WorldCom

(CSCO) - Get Report

and

Williams

(WCG) - Get Report

have

both decided to

cut back.

Declining revenue and dwindling access to stock and debt markets have caused the larger telcos to keep their spending down, ending several years of free spending.

BellSouth also said Thursday it expects per-share earnings to jump 10% to 12% this year and 13% to 15% next year amid strong sales of data and wireless services. Analysts expect BellSouth to earn $2.22 a share in 2000 and $2.51 a share in 2001, according to research firm

First Call/Thomson Financial

. The company earned $2 a share in 1999.

BellSouth said 2001 earnings expectations exclude the cost of entering the national Colombian telephone market and costs related to growth in its high-speed Internet access business. Those costs will cut overall earnings growth to 7% to 9%.