At&T; Shifts Phone War Tactics Company Cuts Back On Cash Payments To Potential Customers

Its bottom line battered by the telephone wars, AT&T Corp. is changing how it reaches out and touches potential customers.

In a push to dissuade people from abusing its generosity, the telecommunications conglomerate is writing fewer checks to first-time customers. Instead, it’s giving away 250 free minutes of calls a month for six months.

The shift away from the checks, which can reach $100, may not sit well with fans of free money. But the cheaper come-on cheered financial analysts on Monday as AT&T reported a 24-percent drop in first-quarter profits - weakened by cut-throat rivalry for long-distance customers as well as $1 billion in new investments.

“We’re seeing what we feel is a glimmer of hope in the consumer side,” said Stephanie Comfort, a telecommunications analyst at Morgan Stanley & Co.

The new promotion is not necessarily cheaper. But AT&T wants to cut down on consumers who sign up to get the free money and then promptly switch to a rival carrier. The company detailed the changes as it reported first-quarter results.

The nation’s biggest long-distance company said it earned $1.12 billion, or 69 cents a share, in the three months ended March 31, down from $1.47 billion, or 92 cents a share, a year earlier, excluding results from NCR Corp. and Lucent Technologies Inc., which AT&T has since spun off.

Companywide, AT&T’s revenue grew a slight 1.5 percent to $13.05 billion from $12.85 billion, reflecting higher demand for local phone service, long-distance service to businesses and wireless services.

But increased spending in new ventures such as local and Internet service - the price of AT&T’s attempt to diversify beyond its core long-distance business - reduced profits by 25 cents per share.

Besides writing fewer checks to lure new customers, AT&T also has stopped offering freebies to 1.7 million customers who are known “spinners” - people who have changed carriers more than three times in a year.

The idea is that free phone calls will convince people to stay with AT&T without cash payments. In addition, AT&T is rewarding free minutes to existing customers who stay with it for a long time.