AT&T to cut 3,500 in business division

AT&T will slash 3,500 jobs in its business services division and take $1.5bn (£940m) in fourth-quarter charges, mainly to reflect losses on investments in its Latin America subsidiary.

AT&T will slash 3,500 jobs in its business services division and take $1.5bn (£940m) in fourth-quarter charges, mainly to reflect losses on investments in its Latin America subsidiary.

The US long-distance telecoms giant disclosed last month that it would be cutting jobs in the business division but had not revealed the number, which represents nearly 5 per cent of the company's workforce. AT&T will take a charge of $240m, or 20 cents per share, in the fourth quarter to cover the costs associated with the cuts.

Slightly more than half of the staff affected are in management, AT&T said, and most of the cuts will happen in the first half of this year through a combination of layoffs and voluntary measures. The company said the cuts were made possible by improved operations and automation and were not indicative of the outlook for the business division.

AT&T said it would take a $1.1bn write-down on its Latin America investments, amounting to about $1.40 per share. AT&T said last year it would cut off its financial support of AT&T Latin America, which provides voice and data services, primarily to businesses, in Brazil, Peru, Chile, Colombia and Argentina.

Additionally, AT&T extended an agreement to offer its customers high-speed internet service from Covad Communications. Because AT&T will be using Covad'snetwork primarily instead of its own, AT&T will take a $200m charge, about 15 cents per share, to reflect the lower value of its network assets.

AT&T is set to report fourth-quarter results later this month and analysts predicted the charges would wipe out any profits. "This will overwhelm any gains they'll have for the fourth quarter and will make them unprofitable for the year," Richard Klugman, an analyst at Jefferies & Co, said. Paul Wright, an analyst at Loomis Sayles & Co, said: "Bringing down costs is the only thing they've got going for them until the economy turns around."

AT&T shares, which have fallen by almost 30 per cent over the past year, were down 18 cents at $27.48 in morning trading on the New York Stock Exchange.