AT&T’s Q4 revenue to be hit by $10 billion charge due to pension obligations

Telecom Lead America: Mobile service provider AT&T will take a charge of about $10 billion in Q4 2012 because of bigger-than-expected pension obligations.

Its financial results for the period will be depressed by high smartphone costs and damage from Hurricane Sandy.

The pension charge is related to an actuarial loss of about $12 billion, which was partially offset by an asset gain of about $1.9 billion.

It also lowered its expected long-term rate of return because of continued uncertainty in the securities markets and the American economy.

The disclosure, announced on late Thursday, comes one day after Wall Street Journal’s report stating that AT&T could look for acquisitions in Europe. Everything Everywhere in the U.K., Royal KPN NV in Holland and unnamed companies in Germany are possible targets.

MORE INFO: For the quarter ended September 30, 2012, AT&T’s revenues were $31.5 billion, flat versus the year-earlier quarter. Third-quarter net income was $3.6 billion consistent with $3.6 billion in the year-earlier quarter.

While AT&T on Thursday said the pension loss would not affect its operating results or margins, it warned that its fourth-quarter earnings would be hurt by other issues.

AT&T is expected to report a $175 million reduction in its operating income because of storms, including Hurricane Sandy, which damaged cellphone towers and caused service failures in the Northeast in late October.

AT&T said its wireless profit would also be reduced by higher-than-expected smartphone sales in the quarter. Because the company pays a hefty subsidy for each smartphone it sells, high sales tend to put pressure on its wireless profit margins. It pays subsidies so that it can offer discounts to consumers who commit to long-term contracts.

AT&T disclosed the charge after the stock market closed. Its shares fell as much as 55 cents, or 1.7 percent, to $32.65 in after-hours trading after ending down 6 cents in regular trading.

ALSO READ: AT&T is set to spend $22 billion per year as Capex (capital expenditure) in the next three years to expand networks.

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