AT&T to take $10-bn hit in Q4
19 Jan 2015
US telecommunications giant AT&T Inc expects to record a pre-tax loss of $10 billion, though the loss will not affect the company's operating results, AT&T said in a securities filing.
The major chunk of the charges amounting $7.9 billion is related to the company's pension and post retirement benefit plans.
The losses are due to decreased discount rates used to measure the company's pension obligations and losses due to ''updated mortality assumptions.''
Additionally, a $2.1 billion non-cash charge is expected to be incurred due to abandonment of copper wire assets, due to declining demand for legacy voice and data products and migration of networks to next generation technology that runs over optical fibre cables.
''This decision by management will not be considered in our assessment of segment performance and therefore, this charge will be reflected only in consolidated results and will not affect segment operating results or margins,'' the company said.
The North American society of actuaries has recently estimated that today's retirees will live about two years longer compared to 2000, necessitating companies to keep more money to pay additional benefits for the added years.
According to some estimates, corporate pension liabilities in the US totalled about $2 trillion in 2013 and the increased life expectancy will add about 7 per cent to the pension liabilities on companies' balance sheets. This is expected to be reflected in the forthcoming earnings reports.
Last year, the telecom giant reported a $7.6-billion gain related to its pension accounting.
Dallas, Texas-based AT&T is a leading provider of wireless, high-speed internet, voice and cloud-based services and the company claims to have the US's most reliable 4G LTE network.
The company reported revenue of $129 billion and net profit of $18 billion in 2013.
Separately, AT&T said that the company has completed the $2.5-billion acquisition of Mexican wireless provider lusacell and appointed Thaddeus Arroyo as its chief executive. The combination will create first-ever North American mobile service area covering 400 million consumers and businesses in Mexico and the US.