The Dallas Morning News

By Roger Yu

DALLAS _ Faced with sinking profit and rising expenses, SBC Communications Inc. said Tuesday that it will lay off between 3,000 and 4,000 employees by the end of the year and take a one-time charge of up to $150 million as a result.

The San Antonio, Texas-based telecommunications giant, which has 172,540 employees, said attrition and «an enhanced retirement program» will eliminate the jobs.

SBC said last month that its payroll cuts will accelerate in 2004 from the 28,000 job cuts the company had in the 12 months ended in September.

An SBC spokesman declined to provide specifics on the locations or departments where the job cuts will occur, but he said the move will probably affect «to some degree most of our geographic markets.»

Larry Solomon, the SBC spokesman, also declined to comment on severance packages or break down how many are expected to leave through the retirement program.

«They’re assuming softness on the top line in cutting their labor force,» said Susan Kalla, an analyst with Friedman, Billings, Ramsey. «They’re cutting the labor cost to compensate for the top line, so the cash flow is likely remain stable.»

Kalla said the company «can cut another 20 percent» of its employees and be able to achieve its objectives.

SBC has been hard hit by the dramatic swoon of the telecommunications industry, and the latest announcement underscores the common fear that the industry would be among the last to undergo the rebound seen in the U.S. economy.

SBC, like other large phone companies, has been struggling as the price of regular phone lines _ its bread-and-butter business _ has dropped severely in the last few years.

Many customers are replacing those lines with mobile phones. But the company’s growing Cingular wireless phone unit and SBC/Yahoo Internet access business have failed to make up for the falling revenue.

SBC’s landline revenue fell 11 percent in the third quarter to $5.5 billion, though it makes up about 54 percent of the company’s total revenue.

SBC’s chief financial officer, Randall Stephenson, said in a conference call with analysts that the company hopes to generate more revenue by bundling more communications services, such as local and long-distance telephone and Internet service under one bill.

Bundling tends to encourage customers’ loyalty and bring in more revenue per user.

In the Southwest and West, where SBC has sold long-distance for several months, the average revenue per customer is about $6 higher per month than in the Midwest, the company said.

SBC is also betting heavily on Cingular Wireless, in which it owns a 60 percent stake.

Stephenson said Cingular’s third-quarter revenue rose about 4 percent from the second quarter. But the company faces stiff competition, and it’s likely to get even more heated now that customers can change carriers without losing their phone numbers.

The digital subscriber line business has been going well for SBC, but it has to fend off competition from other DSL providers and cable companies that also offer broadband service.

SBC’s data business rose 5.5 percent to $2.58 billion in the third quarter from the year-earlier period.

SBC also hopes to focus more on the long-distance service provided to large companies. Its long-distance revenue rose 12.5 percent in the third quarter from the same period last year to $668 million.

Despite several growing segments in its business, SBC hasn’t been able to stem rising expenses. In the third quarter, its operating expenses rose to $8.6 billion from $8.5 billion a year ago.

Meanwhile, its net profit fell 29 percent in the third quarter from a year ago to $1.2 billion.