AT&T Inc. (NYSE:T) estimates a total loss of about $10 billion prior to tax as per its fourth quarter results. The amount, according to the company’s regulatory filing, accounts for a $7.9 billion cost of changes in retiree and benefit plans, while the remaining $2.1 billion accounts for a noncash charge on copper assets that are no longer needed because of declining demand for older data and voice products. The charges, however, won’t prejudice its units’ margins and operating results, the company notes.
Charge related to pensions and benefits records an actuarial loss. AT&T Inc. (NYSE:T), together with 30 other companies, now rely on market-to-market pension accounting. The system allow for an easier assessment of plan performance from the investors’ point of view. Updated mortality assumptions contributed to incurred costs. People aged 65 now live 2 years longer on average than they did back in 2000. That resulted in bigger contributions to pension plans, over and above previous estimates that did not account for the extra years.
AT&T have to reduce the discount rates it assumes for pensions to 4.3 percent, while the rates for retiree benefits were reduced to 4.2 percent. The items, together with updated mortality rates, accounted for the $7.9 billion actuarial loss, which will be recorded in consolidated results. The company noted an asset gain that is higher than expected and in part negated the actuarial loss incurred.
Considering that it will be transitioning its network to next generation technology, AT&T Inc. (NYSE:T) said in its filing that it “determined that specific copper assets will not be necessary to support future network activity,” resulting in the non cash losses of $2.1 billion, which will not pressure operating results.
AT&T Inc. (NYSE:T) have generated a revenue of $33.25 billion in the third quarter, and analysts expects the company to post a fourth quarter revenue of $34.68 billion, as per Thomson Reuters consensus. Shares declined as much as 1.3 percent to $33.37 before reviving to $33.80
This article has been written by Nonito Guntan.