updated 4/23/2004 9:52:27 AM ET 2004-04-23T13:52:27

AT&T Wireless, which is being sold to rival Cingular Wireless, lost $58 million in the first quarter, blaming high customer turnover and deep discounts offered to new customers.

The results reported Friday amounted to a loss of 2 cents a share for the three months ending March 31, and fell short of Wall Street expectations.

A year ago, the Redmond, Wash.-based company had a profit available to common shareholders of $135 million, or 5 cents a share. That figure reflects a $7 million deduction related to preferred shares.

Analysts surveyed by Thomson First Call were expecting earnings of 1 cent a share in the January-March period.

"This was clearly a tough quarter for AT&T Wireless," CEO John Zeglis said in a statement. "The momentum we lost late last year had a carry-over effect on out performance in the first quarter."

Revenue in the first quarter was $4.08 billion, compared to $3.95 billion a year ago.

But Zeglis said the AT&T Corp. spinoff had a major problem with churn, or the turnover of customers. He called the churn rate "unacceptably high."

For the quarter, the company lost 367,000 subscribers and had 21.692 million subscribers as of March 31. Average revenue per user went down, too, for which the company blamed promotional service credits.

Atlanta-based Cingular Wireless is planning to buy AT&T Wireless for $41 billion. The deal, announced in February, is subject to regulatory and shareholder approval.

Cingular is a joint venture of SBC Communications Inc. of San Antonio and BellSouth Corp. of Atlanta.

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