BellSouth Earnings Slide

Cost gains offset big gains in wireless revenue.
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BellSouth's

(BLS)

second-quarter earnings fell 20% from a year ago, driven down by continuing weak revenue in its landline telecom division, higher retiree medical costs and acquisition-related expenses.

Atlanta-based BellSouth earned $795 million, or 43 cents a share, in the quarter, compared with earnings of $996 million, or 54 cents a share, last year. Adjusted for merger and debt-retirement charges, BellSouth earned 46 cents a share in the most recent quarter, beating the Thomson First Call consensus by 3 cents a share.

Normalized revenue rose 27% from a year ago to $8.52 billion, about $30 million ahead of forecasts. The latest quarter saw a 0.5% rise in BellSouth's communication group revenue to $4.54 billion, a 105.6% jump in domestic wireless revenue to $3.44 billion, and a 3.9% rise in advertising and publishing revenue to $527 million.

The gain in wireless revenue reflects the October 2004 acquisition of AT&T Wireless by Cingular, which BellSouth owns with

SBC

(SBC)

.

BellSouth's normalized results include its 40% stake in Cingular, which, as reported last week, saw net subscribers grow by 1.07 million in the second quarter while average revenue per user fell 5.6% from a year ago to $50.43.

In its other businesses, BellSouth saw second-quarter network data revenue rise 4.5% from a year ago to $1.17 billion on a net subscriber add of 124,000 DSL customers.

On the voice side, total access lines were 20.8 million at the end of the quarter, down 419,000 as subscribers continued their long-running migration to cell phones. Residential retail access lines were down 204,000. In contrast, business retail access lines held steady, boosted by 33,000 net new access lines in the small business segment.

The stock closed Friday at $26.72, near the middle of a roughly $4 52-week span.