NEW YORK Jan 17 AT&T Inc warned on
Thursday that it will take a fourth quarter charge of about $10
billion due to bigger than expected pension obligations, sending
its shares down 1.3 percent.
The telephone company also said that results would be hurt
by higher than expected smartphone costs and damage due to
It said that the pension charge related to an actuarial loss
of about $12 billion, which was partially offset by an asset
gain of about $1.9 billion.
But despite the gain, it said it lowered its expected
long-term rate of return due to the continued uncertainty in the
securities markets and the U.S. economy in 2013.
"It's not a real huge negative, but a little bit sobering,"
said Michael Bowen, an analyst with Pacific Crest Securities
referring to AT&T's annual review of its pension and post
employment benefit plans. "They are saying their obligations are
larger than they thought they were."
While AT&T said the pension loss will not affect its
operating results or margins, it warned that its fourth-quarter
operating earnings would be hurt by other issues.
It expects to report a $175 million reduction in its
operating income due to storms, including Superstorm Sandy,
which damaged cellphone towers and caused service outages in the
U.S. Northeast in November.
Pacific Crest's Bowen said the estimate of Sandy costs
seemed "a little bit light" compared to his expectations.
AT&T said its wireless profit will also be reduced by higher
than expected smartphone sales in the quarter.
Because AT&T pays a hefty subsidy for each smartphone it
sells, high phone sales tend to put pressure on its wireless
profit margins. It pays subsidies in order to be able to offer
phone discounts to consumers who commit to long-term contracts.
AT&T shares fell 1.3 percent to $32.76 in late trade after
closing at $33.20 on the New York Stock Exchange on Thursday.