BellSouth Realignment Continues

BellSouth’s second-quarter profits rose as the company continued to
shift its focus from residential landline service to wireless and broadband
offerings.

The regional carrier earned $939 million, or 51 cents per share, which is a 4 percent
bump over the same period last year. Revenue of $5.1 billion was flat.

BellSouth added 120,000 DSL customers during the three-month period, pushing
its total to 1.7 million — on track to meet its goal of 2 million by
year’s end.

To battle Comcast and Time Warner Cable, the company is
adding satellite service from DirecTV to its bundled service. BellSouth
Answers, the residential line/TV package, has launched on BellSouth’s Web
site and aims to lure new customers and retain existing ones.

“It’s very early,” Ron Dykes, BellSouth’s CFO, said in a conference call
with analysts. “[The offer] will be in all channels in August, so by the
end of the third quarter we’ll have a better idea of the impact on the bundle
or other products.”

Wireless is another focus area. BellSouth owns 40 percent of Cingular, which
is acquiring
AT&T Wireless. That merger,
which will significantly expand Cingular’s network, should close in the
fourth quarter.

BellSouth’s share of Cingular’s revenue was $1.7 billion in the second
quarter, a gain of 7.3 percent compared to the same quarter a year ago
thanks to new users and increased data revenues from messaging and other
applications.

Meanwhile, the company continues to make investments in new technologies,
such as fiber-to-the-premises . For now, FTTP will only be
considered for new housing developments where it’s easier to lay fiber. In
addition, a network-hosted VoIP offering for businesses and consumers
entered trials last month.

The focus on new technologies is essential for the company’s growth because
it offsets losses in its traditional phone service. At quarter’s end,
BellSouth had 21.8 million business and consumer access lines, down 3.7
percent compared to a year earlier.

Dykes said it’s unclear whether AT&T’s decision to stop
marketing long-distance service to new customers will help bring new
customers to BellSouth.

“If there is a de-emphasis of [AT&T’s] marketing effort, we’ll see that
quickly,” said Dykes, who noted that there are a number of other carriers
that would compete for that business.

Another uncertainty is the company’s labor situation. BellSouth is also
currently in negotiations with the Communications Workers of America. Dykes
declined to comment on the status of discussion.

BellSouth’s results could bode well for Verizon
Communicatoins , which announces its results tomorrow.

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