AT&T; Profit Climbs Despite Deadbeats

AT&T; Corp. is earning more, but having trouble getting paid.

The nation’s largest telephone company said Wednesday that operating profit from continuing operations for the last quarter of 1996 rose 14%, but said it had to put aside $200 million to cover unpaid bills by customers.

The telecommunications company, which has now completed its split into three major units, said it earned $1.24 billion, or 76 cents a share, in the quarter, compared with $1.09 billion, or 68 cents a share, for the last quarter of 1995.

Chief Financial Officer Richard Miller told Wall Street analysts in a conference call that results for the first quarter of 1997 would be comparable or slightly above those of the fourth quarter.

Revenue in the latest period rose to $13.24 billion from $12.89 billion.

Long-distance revenue increased 3% to $11.54 billion, while call volume rose 6%. The company said the increase came mostly from business services but that its 15-cent-per-minute calling plan for consumers was meeting its expectations for reducing customer defections.

AT&T;’s trouble with collecting phone bills is one result of increased industry competition for customers, spurred by government deregulation. A flood of new AT&T; rivals has made it easy for deadbeats to simply use another company.

“It used to be if you don’t pay your phone bill you didn’t get phone service. Now, with multiple suppliers, we can shut off their service, but they can go someplace else to get service,” Miller said.

The problem is worse among business users, particularly the hundreds of tiny long-distance resellers, some of whom go bankrupt after ordering millions of network minutes from carriers such as AT&T;, MCI Communications Corp. and Sprint Corp. in order to compete with them.

Basking-Ridge, N.J.-based AT&T;’s 1995 fourth-quarter operating profit excluded restructuring and other charges totaling $2.036 billion, or $1.27 a share. Including these charges, its net earnings from continuing operations resulted in a loss of $948 million, or 59 cents a share.

AT&T;’s fourth-quarter 1996 operating net per share was 3 cents below the 79 cents industry analysts had forecast, mainly on the extra $200 million in provisions for bad debts.

As a result, some analysts lowered their 1997 estimates.

“No one was expecting that,” said Bear Stearns analyst Bette Massick. “You have to cut your number on that alone.”

Shares fell 50 cents to close at $38.875 on the New York Stock Exchange.

For all of 1996, AT&T;’s income from continuing operations rose to $5.6 billion from $5.2 billion for 1995, excluding the charges. Earnings per share for 1996 were $3.47, a 5.5% increase over $3.29 per share in 1995.