SBC Down, Not Out

A lot of folks have SBC Communications (NYSE: SBC  ) (and Verizon (NYSE: VZ  ) and BellSouth (NYSE: BLS  ) , its regional Baby Bell brethren) pegged as losers in the great telecommunications game. Are the naysayers right? SBC Communications' second-quarter figures are out, so let's slip on our rose-tinted glasses for a moment and look at the numbers.

Sure, SBC missed analysts' earnings estimates this quarter. But the shortfall was by and large the result of the strike in May by SBC employees. Ignoring the costs of doing business during a four-day work stoppage, SBC actually beat the estimates by $0.04.

OK, it's hard to ignore SBC's shrinking core phone business. Revenue in that business fell 6.3%. Even so, SBC's top-line growth -- albeit a slim 2% -- shows that SBC's push into fast-growth Internet, wireless, and long-distance services are offsetting those local phone losses.

Indeed, digital subscriber lines (DSLs) are selling like hotcakes. In the second quarter, 315,000 people signed up for SBC's broadband Internet service. That growth is up from Q1 and faster than Comcast's (NYSE: CMCSA  ) most recent broadband cable subscriber growth figures. SBC now has 4.3 million DSL users.

Then there's wireless: Far from being a stake in the Bells' heart, wireless is doing wonders for SBC. Cingular -- the company's joint venture with BellSouth -- added 428,000 net subscribers in Q2 for a total of 25 million. Sales rose 7.3% to $4.2 billion from a year ago.

Amazing as it sounds, long distance could be a big growth opportunity for SBC. Long-distance giant AT&T's (NYSE: T  ) decision to pull out of the residential phone market opens the door for SBC to make big gains by selling more service "bundles" in which customers pay a single price for long-distance, local, and Internet services.

Still convinced that SBC is sunk? Admittedly, competition will continue to be fierce, prompting more price wars and putting loads of pressure on margins. But look on the bright side: SBC is still kicking.

David Gardner recommended SBC Communications forMotley Fool Stock Advisorsubscribers. Subscribe today and receive a six-month, money-back guarantee.

Fool contributor Ben McClure doesn't own shares of any companies mentioned in this article.

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