SBC is growing increasingly optimistic, according to William Daley, president of SBC Communications, as the company becomes more confident in weathering the telecom storm and executing its business plan. Daley, who spoke at the Banc of America “Media, Telecommunications, and Media” conference in New York, said the thinking at SBC is changing from “survival mode” to “growing the business.”
In what its expects to be a fiercely competitive industry, SBC intends to become the top telecom service provider in the US. Daley highlighted financial disciple as a key factor in its overall health. The company has reduced its costs in every operational category, except for pension costs. SBC is currently enjoying an upturn in growth rates for long distance and DSL services, offsetting continuing losses in local access lines. SBC has experienced 5 straight quarters of accelerated growth for DSL subscriptions. Regarding DSL pricing, Daly said price cuts are “nothing new,” as SBC has had a $29 per month introductory offer since last fall. Daley acknowledged that at some point it will be critical for SBC to offer video as a bundled consumer service, but he said debate goes on inside the company about the best way to achieve this end — whether through partnerships with satellite providers or a new buildout in its access network.
In consumer long distance, SBC has already established 13% of consumer long distance penetration in California in its first four months. However, SBC continues to lose access lines to UNE-P competitors. Although the access line losses moderated in Q1, Daley said it is too soon to say that SBC has turned a corner regarding UNE-P losses. Reversing the UNE-P trend is a high priority for SBC, said Daley, as non-union, UNE-P competitors continue to erode the economics of delivering local access services. SBC will continue to pressure regulators to offer “fair” prices for its unbundled loops. He cited a recent decision in Illinois to raise the wholesale rates for UNE-P elements as a reason for optimism. He acknowledged that pressure from the AFL-CIO and other unions were instrumental in getting the Illinois state legislature to raise the wholesale rates. SBC hopes a similar process will be seen in other states.
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- In Q1 2003, SBC added 270,000 DSL subscribers, bringing its total to 2.5 million. The addressable DSL footprint now covers 66% of SBC’s consumer and small business lines. SBC expects DSL to be EBITDA positive on a total product basis in early 2004.
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In Q1 2003, SBC added 1.5 million long-distance lines, bringing its total to 7.6 million.
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Also in Q1 2003, SBC’s local voice revenues declined 9.2% year-over-year and 3.1% sequentially, reflecting declines in retail access lines. Total access lines declined by 405,000 in Q1, compared with a decline of 545,000 in Q4 2002 and a decline of 496,000 in Q1 2002. Retail access lines declined by 1.05 million, 70% of which were for consumers. SBC lost 770,000 retail access lines to UNE-P competitors, compared with a loss of 810,000 UNE-P lines in Q4 2002. At the end of Q1, SBC was serving 5.784 million UNE-P lines and 1.754 million UNE-L loops.