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AT&T Expects $10 Billion In Pretax Loss For Fourth Quarter Due To Post Retirement Plans

January 18, 2015 - Written By Justin Diaz

AT&T is due to report their fourth quarter earnings coming up on January 27th, and leading up to that they’re expecting to record and report charges in the amount of up to $10 billion(pretax loss)for the fourth quarter relating to its pension and retiree benefit plans, which amount to a total of $7.9 billion. AT&T’s employees are enjoying longer lives and as a result the benefit plans for those retired employees is still paying out. AT&T was quick to note as well though that the near $10 billion in charges won’t affect their segment operating results or margins.

The $7.9 billion in pretax loss is a result in part of the reductions AT&T made to their assumed discount rates used to measure the pension obligation, down to 4.3% and 4.2%. AT&T also stated that part of the pretax loss was caused by “updated mortality assumptions offset by asset gains in excess of the assumed rate of return.” In addition they’re also expecting to record charges in the amount of $2.1 billion relating to a decline in customer demands for older voice and data devices which contain copper assets. Through AT&T’s analysis in the fourth quarter of their network assets, AT&T found that the majority of customers are no longer interested in legacy voice and data products. AT&T has also been migrating their network to the next generation technology as most carriers have been, which further places emphasis on the lack of need for the assets contained in those legacy products.

Even though AT&T is posting a loss related to their pension and benefit plans, they’ll likely still post decent gains in the fourth quarter earnings numbers. AT&T is also still the second largest national carrier here in the U.S., and they’re slated to become a little bit larger as they have stated in a post last week that the purchase of Mexican carrier Lusacell is now complete. The deal between the two carriers is costing AT&T $2.5 billion, but with the number of customer gains which is around 9 million currently subscribed to Lusacell’s network, plus the licenses and stores, AT&T is looking at a potentially huge growth area by expanding business growth in that region.