Ma Bell will stop seeking new long-distance customers

AT&T Corp. said Thursday it would stop seeking new customers for its traditional consumer long-distance service, the latest in a series of humbling events for a venerable company known to millions of Americans as Ma Bell.

The nation’s largest long-distance company instead will bet its future on providing telecommunications and data services to businesses and selling residential customers technologies such as high-speed Internet and phone service over the Internet.

AT&T will continue to serve its existing residential customers, but it will no longer pour roughly $1 billion a year into winning new ones.

The company has fallen on hard times in recent years amid a series of missteps and a price war that has caused profits to dry up. The announcement coincided with another big drop in quarterly profit, prompting one ratings agency to downgrade its debt to junk status.

“AT&T has made a number of decisions that set it up for a big fall, and a big fall we have seen it take,” said Adam Thierer, a telecommunications analyst at the Cato Institute.

The announcement was seen as another victory for the regional Bell Companies — fierce AT&T rivals that were once mere divisions of the company before its historic breakup by a federal judge in 1984. Shares of all four regional Bell companies – Verizon Communications, BellSouth Corp., SBC Communications and Qwest Communications International – rose on Thursday.

Although still one of the most widely held stocks, AT&T has seen its share price slide precipitously in the last four years. It traded above $90 a share at the height of the Internet boom in 2000, but it was down 8 cents at $14.24 Thursday.

The announcement follows a regulatory decision that increases AT&T’s costs to provide local service and compete with the regional Bells, once mere divisions of AT&T and now its most powerful rivals.

“This decision means that AT&T will focus on lines of business where we are a clear leader, where we control our own destiny and where we have distinct competitive advantages,” said David W. Dorman, the company’s chairman and CEO.

AT&T did not rule out the possibility of spinning off its consumer unit as a separate company in the future.

An ongoing price war has bled the company’s profits. It said profits for the April-June quarter were $108 million, or 14 cents a share, down from $536 million, or 68 cents a share, in the same period a year ago. Revenue dropped to $7.6 billion, down 13 percent from $8.8 billion in the same period last year.

Other companies reporting earnings Thursday included:

• McDonald’s Corp., which reported a 25 percent jump in second-quarter profits, buoyed by a fourth consecutive quarter of double-digit sales increases.

Strong results from salads, late-night hours and other recent initiatives enabled the company to extend its recent winning streak despite a turbulent spring that saw chief executive Jim Cantalupo die suddenly and his successor, Charlie Bell, diagnosed with colorectal cancer.

Net income for the April-through-June quarter was $590.7 million, or 47 cents per share, up from $470.9 million, or 37 cents per share, a year earlier. Revenues were $4.7 billion, up 10 percent from $4.3 billion for the second quarter of 2003.

• The Coca-Cola Co. reported a 16 percent jump in second-quarter profit on solid revenue, but said it is experiencing challenges in several international markets.

The world’s largest beverage maker said it earned $1.58 billion, or 65 cents a share, for the three months ending June 30, compared to a profit of $1.36 billion, or 55 cents a share, in the year-ago period.

Excluding one-time items — including a favorable tax settlement and writedowns of various manufacturing investments — Atlanta-based Coke said it earned $1.55 billion, or 64 cents share,

Revenue in the April-June period was $5.97 billion, up 5 percent from $5.70 billion a year ago.

“Our results in the quarter reflect solid performance in many markets, but we are experiencing challenging conditions in several key countries, including Germany, Mexico and the Philippines,” chief executive Neville Isdell said.