Costs bite deep into BellSouth earnings

Integration costs associated with Cingular's acquisition of AT&T Wireless took their toll on BellSouth earnings in the second quarter, as net income fell 20 per cent.

However, Duane Ackerman, chief executive, said his strategy of focusing on Cingular and broadband DSL growth was paying off.

Cingular, the largest US mobile phone carrier following the AT&T Wireless purchase, accounts for 40 per cent of BellSouth's profit a higher percentage from wireless than any of the other regional carriers.

Net income at BellSouth, the third-largest US telecommunications group, fell to $795m, or 43 cents a share, from $996m, or 54 cents. Excluding merger and other one-off costs, and including its share of Cingular, BellSouth earned $849m, or 46 cents per share.

The costs of integrating AT&T Wireless cut 2 cents, or $204m, from net income, while early debt retirement cut another 1 cent from earnings per share.

Revenue, including the company's stake in Cingular, was $8.52bn, up 27 per cent from a year earlier. Excluding Cingular, revenues from BellSouth's traditional business operations increased by just 1.2 per cent to $4.63bn.

“Our results this quarter clearly demonstrate how Cingular's progress impacts BellSouth's bottom line,” Mr Ackerman said.

BellSouth has been battling local line losses and customer defections to rival wireless services and internet telephony by offering bundled services and pushing broadband DSL.

Total access lines fell by 419,000 as customers switched service to wireless phones or competitors. But BellSouth added 301,000 long-distance lines and signed up 124,000 new DSL customers to bring its DSL line total to 2.47m.