Sprint, BellSouth, Bell Atlantic Earnings Fail to Excite

The three major telecommunication companies reported third-quarter earnings today that generally met or came close to analysts' expectations.
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Three major telecommunication companies --

Sprint

(FON)

,

Bell Atlantic

(BEL)

and

BellSouth

(BLS)

-- reported third-quarter earnings today that generally met or came close to analysts' expectations.

Investors showed little reaction to the reports and the three company's stocks were mixed at midday.

"No surprise there," said Richard G. Klugman, an analyst with

Donaldson Lufkin & Jenrette

, of the results.

Sprint, the nation's No. 3 long-distance carrier that is in the midst of the world's largest-ever merger with

MCI WorldCom

, said net earnings fell 13% to $359 million, or 41 cents a diluted share, from $415 million, or 47 a share, from the comparable quarter in 1998. The company, which was on the mark for a consensus of analysts who were polled by

First Call/Thomson Financial

, blamed losses on its international joint venture,

Global One

, and its new telephone network for high-speed data services.

Sprint's stock was up 1/16 at 63 7/8.

Despite analysts' concerns that Sprint would be hurt by the continuing long-distance price wars, analysts were impressed that the company posted strong growth in its local and long-distance services.

"They came in quite high, in terms of their core operations," said Klugman, who rates Sprint a buy and whose firm has not done any underwriting for Sprint. "That's really important."

The Kansas City, Mo.-based company posted 7% increases in revenue for the quarter to $4.3 billion from $4 billion. Long-distance revenues led the way, rising 8% to $2.7 billion from $2.5 billion.

The $115 billion acquisition by MCI WorldCom will not affect Sprint's daily operations until its expected close later next year. The merger still hinges upon approval from MCI WorldCom and Sprint stockholders, along with the

Federal Communications Commission

, the

Justice Department

and various other state and foreign authorities.

Meanwhile,

Sprint PCS

(PCS)

, the wireless unit of Sprint that is individually traded, posted a third-quarter net operating loss of $615 million, or $1.31 a diluted share, compared with a loss of $176 million, or $1.04 a share, in last year's comparable quarter. Revenues for the unit more than doubled for the quarter, rising to $844 million from $320 million.

As part of vigorous marketing promotions and holiday purchases, the company predicted it will add more than 1 million new customers in its fourth quarter. The large increase will cause Sprint PCS to experience greater fourth-quarter losses in earnings before interest, taxes, depreciation and amortization than in the third quarter, the company said.

"Sprint's FON Group performance was marked by excellent execution in our core businesses, effective leveraging of distribution channels to increase product sales and significant advances toward our nationwide roll-out of Sprint ION to businesses and consumers,'' William T. Esrey, Sprint chairman and chief executive, said in a statement.

Bell Atlantic, which is the No. 2 local phone carrier in the U.S., posted a 10% increase in third-quarter profits to $1.2 billion, or 76 cents a diluted share, from $1.1 billion, or 69 cents a share, in last year's comparable quarter.

The New York City-based company met a First Call poll of a consensus of Wall Street analysts' earnings expectations. But Bell Atlantic's stock was down 3/4 to 63 3/16.

Four-fifths of Bell Atlantic's revenue growth came from data services' sales, with digital data revenues rising 25% from the 1998 third quarter, the company said.

"They were very stable," Klugman of DLJ said, adding he was impressed with increases to the company's wireless subscribers. His company has not done any underwriting for Bell Atlantic. Klugman foresees Bell Atlantic's growth future dependent upon wireless growth, which the company has insisted is not necessary.

Klugman rates Bell Atlantic a market performer.

Third-quarter revenues rose 5% to $8.3 billion from $7.9 billion in the comparable 1998 quarter.

"Bell Atlantic took the necessary steps in the quarter to meet the rising demand for bandwidth from customers in all of our markets," Ivan Seidenberg, the company's chairman and chief executive, said in a statement. "Besides doubling our targets for the most aggressive deployment of DSL technology in the country, we expanded our product set to include high-speed data services such as managed private networks, and we extended our reach through our agreement with Metromedia Fiber Network."

BellSouth, which surpasses 10 million wireless subscribers during the quarter, reported net earnings for the third quarter of $1.7 billion, or 51 cents a diluted share, from $1.4 billion, or 41 cents a share, from the comparable quarter in 1998. Analysts polled by First Call expected earnings of 50 cents a share.

BellSouth's stock was down 3/8 to 42 1/4.

"Our financial performance didn't skip a beat in the third quarter," Duane Ackerman, BellSouth's chairman and chief executive, said in a statement.

Revenues for the Atlanta-based company increased 9.5% to $6.4 billion from $5.8 billion in the 1998 third quarter.