Posted by : trraju on Oct 24, 2003 - 10:50 AM General

The ailing telecom industry's long-awaited rebound still looks a ways off.
Despite better-than-expected results Wednesday from phone company BellSouth and telecom gear seller Lucent Technologies, neither could say that the good times are back.
''This is not a huge economic shift or a huge economic recovery,'' says BellSouth CFO Ron Dykes. Demand for telecom services is ''awfully weak.''

Lucent, meanwhile, reported its first quarterly profit in more than three years. ''The worst does, absolutely, seem to be behind us,'' CEO Patricia Russo says. Yet she cautioned of ''significant challenges facing the industry.'' And while she noted growth opportunities, she also says there will be ''ups and downs.''

In the ultra-competitive wireless sector, investors paid more heed to AT&T Wireless' slower customer growth than its stronger financial outlook. Shares of AT&T Wireless, which reported after the market closed Wednesday, fell 6.3% to $7.74 in after-hours trading.

But long-suffering telecom investors also welcomed bits of good news on a day when many stocks plunged.

Lucent's shares soared 13.5% after reporting its first profit since March 2000. It posted net income of $99 million, or 2 cents a share, for its fiscal fourth quarter.

BellSouth shares spiked 5% after it posted its first year-over-year revenue increase in two years. Third-quarter revenue, including its stake in Cingular Wireless, rose 2.7% to $7.3 billion from a year ago. It was helped by gains in long-distance and broadband customers and better revenue from Latin America.

Still, after this week's lackluster results from local phone giant SBC Communications and No. 1 long-distance carrier AT&T, analysts are wary.

''One quarter does not a recovery make,'' says equipment analyst Erik Zamkoff of Independent Research Group. ''Telecom right now is a sick industry.''

Zamkoff expects global spending on telecom equipment to fall 7% this year to about $129 billion and decline 4% next year.

Lucent's fourth-quarter revenue rose to $2.0 billion, up 3% from the third quarter, but it expects 2004 revenue to be only flat to slightly better than 2003's $8.5 billion.

As such, Lucent says it will continue to keep a close eye on costs, as revenue growth remains uncertain.

BellSouth also cited cost cuts as a prime reason its net income, including Cingular, rose 2.3% to $980 million from a year ago. It also noted success in keeping and winning customers with ''bundles'' of local and long-distance, features, broadband and wireless.

Even though BellSouth curtailed customer losses, analysts wonder if that can last. ''The bottom line is there is way too much competition in this business,'' Guzman & Co. telecom analyst Patrick Comack says. ''Consolidation is desperately needed.''

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