AT&T weaker business outlook dampens wireless strength

Tue Jul 24, 2012 12:10pm EDT
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By Sinead Carew

(Reuters) - AT&T Inc pulled back its outlook for business services this year, sending its shares down 3 percent despite its better than expected quarterly profit as it reduced costs from customer upgrades to smartphones such as the Apple Inc iPhone.

After pushing up AT&T's share price up 17 percent so far this year, investors pulled back on Tuesday due to economic uncertainties and expectations that the company will not be able to sustain its strong wireless profit margins once Apple launches its next iPhone, expected in the fourth quarter.

The company said that it no longer expects its revenue from business services to return to growth this year because of the weak economy. Chief Financial Officer John Stephens did not say when he expects growth to recur in an conference call because businesses are being "very careful" about their spending.

"We are still optimistic about our wireline business and believe particularly our business revenues are going to be positive going forward. It just may take us a little bit longer," the executive told analysts in a conference call.

AT&T revenue from business customers fell 1.5 percent in the second quarter to $9.1 billion.

While analysts said that the comment should not be a big surprise they said it dampened investor enthusiasm about the stronger than expected wireless quarter.

"Now the quarter is behind us the focus turns to the iPhone 5 and trying to model that impact as well the economy." said Roe Equity Research analyst Kevin Roe.


An At&T logo is seen atop a store in Beverly Hills, California August 31, 2011. REUTERS/Danny Moloshok