AT&T, the recently renamed US telecoms group, raised significantly its estimates of savings and synergies generated by its acquisition late last year of the old AT&T business and said it expected to record double-digit earnings growth over the next three years.
“Synergies from the AT&T merger will be 20 per cent better than expected,” said Richard Lindner, AT&T’s chief financial officer who, together with Ed Whitacre, chief executive, engineered the $16.5bn acquisition of AT&T by the former SBC Communications group.
Senior AT&T executives told analysts in New York that they now expected the net merger synergies to total $18bn, up from an earlier projection of $15bn.
They added that quick approval of the deal, coupled with the better-than-ex-pected performance of the former AT&T long-distance and business communications operations, had raised the value of the merger by another $3bn.
Mr Lindner said the stronger performance, coupled with additional cost savings from job cuts and other actions meant, “we are confident in our ability to produce double-digit earnings per share growth in each of the next three years”.
Despite the erosion of its traditional long-distance phone business Randall Stephenson, chief operating officer, predicted that revenue at the old AT&T would begin to rise again in 2008.
“The AT&T merger is everything that we hoped and it’s more than we hoped,” Mr Whitacre, said.
Since the merger was approved AT&T has moved quickly to integrate the two companies and exploit opportunities for costs savings while pushing ahead with investments in faster growth areas including wireless through the Cingular Communications joint venture with BellSouth and advanced IP-based services including video.
Last week AT&T reported that fourth-quarter profits more than doubled, buoyed by strong results from Cingular, which added 1.8m net new subscribers during the quarter and the growth of AT&T’s broadband DSL subscriber base, described yesterday by executives as, “the engine of future growth”.