Sprint said revenue in its wireline FON group dipped 3% in 2nd quarter to $4.31 billion, with net income falling 35% in year to $290 million but meeting lowered company forecasts. It said net income figure excluded costs of failed WorldCom merger and nonrecurring gain on sale of independent directory publishing unit. Despite overall decline, local telecom revenue was up 3% in quarter to $1.55 billion and voice-grade equivalent lines rose 17% in year. In global market segment, revenue dipped 5% as result of sagging long distance voice revenue and reduced sales of network management services and customer-premises equipment. Business voice revenue continued to “be impacted by aggressive market pricing,” Sprint said. However, sales of data services, particularly of asynchronous transfer mode, continued to grow. Data revenue rose 6% in quarter and dedicated IP service revenue 30%. Not surprisingly, Sprint PCS, its wireless tracking stock, showed strong growth, with revenue up 53% in quarter to $2.26 billion. Sprint PCS added more than 1 million customers in quarter, with total customer base, including resale and affiliate customers, reaching 12.8 million, up 60% in year. Sprint PCS said business customer base surged 62%, driven in part by its wireless Internet service for business content and applications. In quarter, carrier made $1.06 billion in capital expenditures. Sprint PCS reiterated that its wireless net customer additions for year could hit 3.8 million. That would create operating profit of $1.7 billion for year, $100 million above forecast. On wireline side, Sprint said it expected FON Group revenue to decline 1-2% in 3rd quarter from year ago. PCS capital spending for year will total $3.4 billion and wireline spending $5.9 billion. Sprint PCS CFO Charles Levine said in conference call that carrier wasn’t affected by recent U.S. Appeals Court, D.C., ruling returning C- block licenses to NextWave. That decision upsets results of C- block auction earlier this year. Levine said: “We only bid on licenses in Tampa, Orlando, Cincinnati, Dayton and Norfolk and we will not be capacity constrained.” He acknowledged ruling “creates a level of uncertainty in the industry” but said ubiquity of Sprint’s wireless network safeguarded company from impact. Sprint Exec. Vp-CFO Arthur Krause said Sprint PCS would invest $700-$800 million to complete nationwide upgrade to CDMA 1xRTT flavor of 3G. That’s expected to be completed by mid-2002, with half of planned spending this year and half next year.
Moody’s cut Lucent debt rating to “junk” status Tues. with warning it may cut rating again over concerns of company’s ability to raise cash. Agency cut senior long-term debt to “Ba1,” its highest junk grade, from “Baa3” and Lucent commercial paper, or short-term debt, from “Not Prime” from “Prime-3.” Cuts affect $3.8 billion of Lucent debt. Company faces “more protracted downturn” and may not be able to sell its fiber cable division fast enough and for enough money, Moody’s said. Lucent also faces Sept. 30 deadline to raise $2 billion to finish spinoff of Agere Systems optical components unit. Standard & Poor’s cut equivalent ratings for Lucent to junk June 12.
ATLANTA -- Growth of residential DSL could be twice that of cable modems, but operational problems are likely to slow rollout, Gartner Dataquest survey found. Survey is good news for DSL and shows “high-speed Internet access in the U.S. is in the mainstream and quickly replacing dial-up,” Dataquest Vp-Chief Analyst Kathie Hackler said at Supercomm 2001 here. In U.S., high-speed Internet access (cable and DSL) grew 67% in 2000, compared with 7% gain in dial-up connections. One-quarter of U.S. households could have high-speed Internet by end of 2001 and broadband access will account for 45% of consumer Internet access by 2005, Hackler said.
FCC ruled rate charged by Business Telecom Inc. (BTI) for switched access to and from telephone lines of end-user customers was unlawfully high under Sec. 210 of Communications Act. Commission order adopted May 25 resolved 2 complaints filed by AT&T and Sprint against Raleigh-based CLEC after primary jurisdiction referrals had been made from U.S. Court, Alexandria, Va. FCC said in years 1998-2000 BTI charged long distance carriers 7.2 cents per min. for switched access service. Comparing rates charged by BTI for similar services, average access rates of other carriers and rates charged by ILECs serving same areas served by BTI, Commission determined BTI’s rate was unlawfully high. For purposes of calculating damages sustained by AT&T and Sprint, FCC said highest lawful rates BTI could have charged were: (1) July 1, 1998-June 30, 1999 -- 3.8 cents per min. (2) July 1 1999-June 30, 2000 -- 3 cents. (3) July 1, 2000- May 30, 2001 -- 2.7 cents. Access rates CLECS may charge in future are subject to FCC order (CD April 27 p1) starting at 2.5 cents per min. in first year, dropping to 1.3 cents 2nd year and 1.2 cents 3rd year. Comr. Furchtgott-Roth dissented.
Loral-Globalstar Chmn. Bernard Schwartz will give up his duties as head of Globalstar once successor is found to run fledgling satellite telephone network, as company edges toward brink of bankruptcy. Schwartz said he wanted to spend more time concentrating on core businesses of Loral, which has been hurt by problems at Globalstar. Schwartz said decision to step down was result of Loral effort to salvage Globalstar, which appeared to be on life support with stock trading as low as 41 cents at midday Tues. Nasdaq has threatened to delist stock if shares continue to trade below $1 for 10 consecutive days, SEC filing said. Company also faces lawsuit by Alcatel in U.S. Dist. Court, N.Y., after Loral terminated broad teaming arrangement.
Singapore Telecom (SingTel) offered $3.8 billion for remaining stake in Australia’s Cable & Wireless Optus Ltd., buying 52.5% from U.K.’s Cable & Wireless (C&W). Companies said transaction valued equity of Optus, 2nd largest telecom carrier in Australia, at $4.66-$5.38 billion. Deal would deconsolidate Optus and $1.08 billion of its debt from U.K.’s C&W, realizing $3.5 billion from parent Cable & Wireless. Singapore Telecom will pay parent C&W in combination of cash, reduced debt and SingTel bonds. C&W and SingTel said they expected to close deal this summer. Terms constitute prebid agreement in which SingTel agreed to accept 19.9% of Optus shares, maximum amount allowed by Australian law at this stage of deal. Optus has 4 million customers in Australia and offers wireless, data and IP services, broadband local and long distance telephony, Internet and pay-TV. Offer is conditioned on more than 50% shareholder acceptance and regulatory approvals. Moody’s placed senior unsecured and short-term ratings of debt guaranteed by Optus on review for possible upgrade. Moody’s said review would focus on likelihood that SingTel would acquire majority stake and potential impact of acquisition on its credit profile. Vodafone reportedly withdrew from bidding for Optus over weekend, with SingTel coming in with offer that was 13% above Optus closing price of $2 per share in Australia Fri.
Major drop in in ad expenditures by major product categories (such as autos, down 25%, and telcos, down 17-22%) resulted in 13% decrease in national TV spot ads so far in first quarter 2001, TV Bureau of Advertising reported. When local ads are factored in, TV spot is down only 3.8% in quarter, Bureau said. Only categories in top 10 showing first-quarter growth are movies (30- 35%) and travel (3-8%).
WorldCom said its Internet and data revenue jumped 15% in quarter ended Dec. 31 but net income for overall company plunged 44% to $726 million from $1.3 billion year ago. While continued long distance pricing pressures pinched profits, WorldCom said revenue increases were driven in part by 28% year-over-year growth in data and Internet services. For 2000, international services revenue rose 29%. Based on recent restructuring, company reported financial results separated by high-growth data operations of WorldCom group and MCI Group long distance unit. For latter, revenue in quarter dropped nearly 9% to $3.8 billion from $4.2 billion year earlier. MCI Group saw growth in consumer subscription long distance and local services businesses, offset by lower revenues from transaction brands and calling card service. Services such as calling cards are seeing fall-off as more customers migrate to wireless plans, company said.
Minority ownership of commercial TV and radio stations increased 0.9% overall over last 2 years, but minorities’ share of TV market actually declined in 2000, NTIA said in report released by Commerce Secy. Norman Mineta Tues. “Unfortunately,” this was increase “that we must attribute mostly to an industrywide economic boom and an improved reporting methodology,” Mineta said, and “clearly there is reason for concern.” NTIA survey showed that consolidation in industry threatened survival of minority and single-station owners, he said.
Level 3 plans to build western link to previously announced pan-Asian undersea cable system it’s constructing with Flag Telecom to connect Hong Kong and Japan. Total cost of system is $900 million, with Hong Kong-Japan segment expected to be in service by June. New western segment will include connections to Korea and Taiwan and is expected to begin operating in early 2002. Taiwan segment is to start late this year. “Our partnership with Flag enables us to mitigate the cost of this expansion, as well as our initial cost of building the Hong Kong-to-Japan segment,” Level 3 Asia CEO Steven Liddel said. Companies said that Asian undersea cable system would connect to N. America and Europe through Level 3’s ownership in Japan-U.S. cable and company’s own transatlantic cable. Level 3 is overseeing construction of eastern link of pan-Asia system and Flag has purview over western link and management of entire system when it’s completed. Each company will own 3 fiber pairs in new system, which will have capacity of 320 Gbps. Carriers said upgrades could provide maximum capacity of 2.5 terabits per sec (tbps) on eastern link and 3.8 tbps on western segment.