April 18 (Bloomberg) -- AT&T Inc. said it would fire about 4,650 workers, trimming the managerial ranks in its fading home- phone business after more than $100 billion in acquisitions.

The decision covers about 1.5 percent of the workforce, San Antonio-based AT&T said today in a regulatory filing. The dismissals at the largest U.S. phone company are in addition to the 10,000 announced with the $86 billion purchase of BellSouth Corp. in December 2006, spokesman Walt Sharp said.

Most of the reductions apply to the local-phone business, Sharp said. That unit lost 1.6 million residential lines last year as customers switched to cable and wireless phone service. AT&T has sought to reduce overlap in its operations since buying BellSouth and the former AT&T Corp., with plans to slash annual costs by about $7 billion by 2009.

``They're going to have to continuously downsize that business,'' said Craig Moffett, an analyst at Sanford C. Bernstein in New York. ``This isn't the first and won't be the last time.'' He expects the shares to perform in line with the rest of the market.

Economists predicted this month that the U.S. economy won't grow in the first half of the year, the weakest performance since the 2001 recession, as consumers grapple with falling home prices and increasing energy costs.

Service Shutdowns

AT&T plans to book a pretax cost of about $374 million for the job cuts in the first quarter. Before the announcement, analysts on average predicted AT&T would report net income of $3.95 billion for the period. The phone company had about 310,000 employees as of Jan. 31.

The company is scheduled to report first-quarter earnings on April 22. In the previous quarter, sales fell short of analysts' estimates after some customers failed to pay their bills, hurt by slowing economic growth.

AT&T fell 6 cents to $37.51 at 4 p.m. in New York Stock Exchange composite trading. The shares have dropped 9.7 percent this year, compared with a 16 percent decline in the Standard & Poor's 500 Telecommunication Services Index.

The company shut off service for about 100,000 non-paying customers in the fourth quarter, part of the 656,000 primary residential lines lost then. Stephenson told investors in January that shutdowns occurred mainly in the region around the Great Lakes.

Slowing Losses

To slow phone-customer losses, the company is spending $7 billion over five years to rewire parts of its network to offer faster Internet speeds and television service over its lines. AT&T has also fueled growth with its mobile-phone business and sales to large U.S. corporations with foreign operations. A minority of the employees affected by the reductions work in the unit that serves large corporate customers, Sharp said.

The cuts will occur in all parts of the U.S., he said. AT&T provides home-phone service in 22 states, including the nine- state territory acquired from BellSouth. Many of the firings come from the company's move to shift from five regional units to one division that covers the entire territory, eliminating some duplicate positions, AT&T spokesman Michael Coe said.

With new hires in other parts of the business, the company expects overall headcount to remain stable this year, according to the filing.

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To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net

Last Updated: April 18, 2008 16:15 EDT