Business Dials Down at Phone Companies

April 19, 2008— --

While wireless growth should continue to boost earnings, U.S. carriers are suffering from people disconnecting home phones and from new mobile users opting to pay for calls in advance, usually meaning less revenue for the companies, analysts said.

"What you'll see is people trying to economize on their monthly plans," said Donna Jaegers, analyst at Janco Partners, noting higher gasoline and food prices, and unemployment.

Setting a somber tone ahead of its first-quarter results next Tuesday, AT&T said on Friday it would cut its work force by 1.5 percent, or around 4,600 jobs, resulting in a charge of $374 million pretax.

Analysts are projecting AT&T to report a 23 percent rise in quarterly profit to $3.5 billion, or 58 cents per share, according to Reuters Estimates.

Verizon is expected to report a profit rise of 19 percent to $1.8 billion, or 61 cents per share, on April 28 and Sprint Nextel is seen posting a loss of $464 million, or 14 cents a share, on May 12, according to Reuters Estimates.

Verizon and AT&T are seen adding 1.4 million and 1.34 million wireless customers respectively in the first quarter, according to five analysts. Many of those customers likely came from Sprint, which warned of a loss of 1.2 million users.

"We need to be looking at whether or not Sprint would recover," said Bear Stearns analyst Michael McCormack. "In which case those very strong subscriber numbers at AT&T and Verizon in the first half could become more challenging in the second half of the year."