EARNINGS PREVIEW: US Telecoms Expect Strong Wireless Qtr
Published on: 17th Jul 2008
Note -- this news article is more than a year old.
TAKING THE PULSE The wireless business continues to hum for the U.S. telecommunications companies, but signs of competitive pressure are beginning to creep in. Wireless continues to be driven by smartphone sales and the adoption of pricier service plans, offsetting the deteriorating wireline business. AT&T remains at the forefront but eventually will lose its leadership position in wireless once Verizon Communications completes its acquisition of Alltel. Smaller companies, meanwhile, are scrambling to catch up, with prepaid wireless reseller Virgin Mobile USA acquiring niche player Helio. The landline business, meanwhile, continues to deteriorate as a result of economic pressures and alternative lines of communications.
COMPANIES TO WATCH:
AT&T - reports July 23
Wall Street Expectations: Analysts polled by Thomson Reuters expect earnings of 76 cents a share on revenue of $31.16 billion. Year-earlier earnings were 47 cents a share on revenue of $29.48 billion.
Key Issues: The largest U.S. telco expects soft landline sales but a continued surge in wireless revenue. While last year's period saw a late burst from the release of the iPhone, this year's version of Apple's deluxe phone didn't come out until after the quarter. Wachovia said AT&T should expect lower margins due to operating costs from the "aggressive deployment" of the 3G iPhone. And as competition stiffens, Baird expects AT&T to add fewer wireless customers.
Verizon Communications - reports July 28
Wall Street Expectations: Analysts project earnings of 65 cents a share on revenue of $24.2 billion. Prior-year earnings were 58 cents on revenue of $23.27 billion.
Key Issues: The industry's No. 2 player is expecting a solid quarter from its wireless business as it continues to boast the industry's best financial metrics. In response to AT&T's plans to subsidize the new iPhone, Verizon cut the price on its LG Electronics Voyager, one of its many touchscreen rivals. Verizon President Denny Strigle told analysts last month that he was bullish on cash flow margins in the wireless business and that unlimited plan has been beneficial. In February, Verizon was the first to announce a $100 flat-rate cell phone plan. JPMorgan, however, remains skeptical on the older landline business. Analysts will be closely monitoring how well its FiOS TV service has fared against the cable and satellite competition.
Sprint Nextel - reports Aug. 6
Wall Street Expectations: The struggling wireless firm is seen posting a 3-cents-a-share profit on revenue of $9.17 billion. Year-earlier earnings were 1 cent a share on revenue of $10.16 billion.
Key Issues: Sprint's uphill battle to keep its customers from jumping ship to AT&T and Verizon may be changing with the advent of the Samsung Instinct, the company's iPhone look-a-like; increased focus on customer service; and an improved advertising campaign. While the problems aren't completely solved, some are expecting Sprint to show signs of progress this quarter. JPMorgan "expects gradual improvement in subscriber losses," but added growth may not resume until the second half of next year.
Cisco Systems - reports Aug. 8
Wall Street Expectations: Analysts predict earnings of 39 cents a share on revenue of $10.31 billion, compared with year-earlier earnings of 35 cents on revenue of $9.55 billion.
Key Issues: While Cisco is expecting revenue and margin to increase in its fiscal fourth quarter, the network-equipment company said in May that growth would be slower than previously thought, forecasting 9% to 10% revenue growth versus its long-term growth estimate of 12% to 17%. With the economy slumping, many businesses - Cisco's target market - are foregoing upgrades on network systems and materials. Switches, a piece of networking gear used to connect computers - and Cisco's core business - recorded 3% growth last quarter, down from typical mid-teen growth, and wasn't expected to improve.
(The Thomson Reuters financial estimate and year-ago net may not be comparable due to one-time items and other adjustments.)
-By David Benoit, Dow Jones Newswires; 201-938-2472; firstname.lastname@example.org
(END) Dow Jones Newswires