AT&T Wireless's Numbers Down, Prepares For Acquisition By Cingular

AT&T Wireless announced a drop in sales and profits, as it moved closer to its planned acquisition by Cingular Wireless. The firm earned $117 million on revenues of $4.21 billion in its third quarter financial report, announced Tuesday.

In the year earlier quarter, AT&T Wireless reported earnings of $156 million on sales of $4.07 billion. The firm said that while data-messaging services grew, those gains were more than offset by customer defections.

"Customer deactivations persist at unacceptable levels," said John Zeglis, AT&T Wireless chairman and CEO, in a statement. "We have a number of initiatives underway addressing this issue and are extremely focused as an organization on turning it around."

AT&T Wireless, which, with nearly 22 million subscribers is the second largest cell phone service provider in the U.S., is in the process of being acquired by Cingular for $41 billion. Cingular is owned jointly by BellSouth and SBC Communications. Regulatory approval is expected soon, although AT&T Wireless may have to vacate some markets where both firms--AT&T Wireless and Cingular--are dominant mobile-phone carriers.

Although AT&T Wireless grew its customer base by 170,000 subscribers in the third quarter, its customer turnover grew to 3.7 percent. The firm launched new promotional campaigns to attract new customers in the quarter, but the campaigns were costly, hitting the firm's bottom line negatively. There were some bright spots in the financials report, however."Led by strong customer demand for messaging services, mMode and business data solutions," the firm stated, "revenue from wireless data services increased 145 percent over the prior year period."

Zeglis said he was encouraged by the outlook for improved earnings, operating free-cash flow, and the gross customer additions.