WASHINGTON (CBS.MW) -- Now that AT&T has shorn off its most attractive growth businesses, the big question is what happens to the rest of Ma Bell. Can the dowdy old-line phone carrier survive?

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Company observers tend to fall into two sharply divided camps.

Some, like influential Wall Street analyst Jack Grubman, believe AT&T (T: news, chart, profile) can recover. By jettisoning its wireless and cable businesses, Ma Bell can refocus on core long-distance operations and drive profits through the introduction of sophisticated new data services for corporations.

Others, such as Bill Whyman of The Precursor Group research firm, argue that AT&T is doomed. The Baby Bells, he said, will increasingly take market share away from their former parent as they gain regulatory approval to sell long-distance alongside local phone service.

At the same time, even if the old AT&T doesn't have much life left, shareholders should be okay. They'll retain significant stakes in AT&T Wireless (AWE: news, chart, profile) and the new AT&T Comcast. Both offer solid growth prospects and the potential for long-term stock appreciation, though at the price of more day-to-day volatility.

Yet the comforts of a substantial dividend in a steady if slow-growing blue-chip performer are over; management slashed the payout in an earlier restructuring move. Gone are the days when AT&T was seen as the stock of choice, as the old saying went, for "widows and orphans."

On Thursday, AT&T's shares traded as high as $18.75, their highest level in a month. They ended the session up $1.05 at $17.85.

AT&T unburdened

By agreeing to sell its cable business to Comcast (CMCSK: news, chart, profile), AT&T bought plenty of breathing room for its mainstay phone operations. Comcast agreed to take on $20 billion in AT&T debt, reducing Ma Bell's own debt load from around $36 billion to $16 billion.

"In one fell swoop, AT&T solves its debt problem, which gives it financial flexibility to do things that can spur growth in core long distance," Grubman said Thursday in a note to clients.

By and large, analysts expect AT&T to concentrate on its corporate-services business, which caters to large companies willing to pay sizable sums for secure and reliable data communications. AT&T and WorldCom (WCOM: news, chart, profile) remain the clear market leaders in that category.

Excluding the cable assets, AT&T's corporate-services division is expected to generate $27 billion of the company's projected revenue of $38 billion in 2002, Grubman calculates. The residential long-distance business will account for the rest.

Of course, AT&T and WorldCom alike face significant competition from upstarts such as Qwest Communications International (Q: news, chart, profile), but the pressure has eased amid a raft of failures among smaller rivals.

"This is an area where AT&T has a lot of expertise and there is a lot of money to be made," said Nicholas Economides, a professor of economics at New York University's Stern School of Business who specializes in communications issues. "It can provide more sophisticated services for businesses."

In the past few years, it's been widely viewed that the company's ambitious $100 billion foray into the cable business and, to a lesser extent, the wireless market diverted the attention of executives and undercut its corporate-services division. Without those distractions, AT&T ought to be able to better manage its phone operations.

Residential battleground

The consumer business, however, remains a sore spot. The nation's former monopoly is steadily losing share to the Baby Bells as they gain wider entry into the long-distance market.

"It probably can't survive independently," Whyman said. "Our sense is that it will be acquired by someone else."

The natural question then arises: By whom? Among the Bells, Verizon Communications (VZ: news, chart, profile) and Qwest own or have access to other national networks, leaving BellSouth (BLS: news, chart, profile) and SBC Communications (SBC: news, chart, profile) as the most likely acquirers.

Yet AT&T's consumer-phone network is based on older technology. Potential suitors could buy superior networks from distressed "next-generation" carriers at cheap prices. Candidates falling into this category include Broadwing (BRW: news, chart, profile), Global Crossing (GX: news, chart, profile), Williams Communications (WCG: news, chart, profile) and Level 3 Communications (LVLT: news, chart, profile).

Another option is for a suitor to "buy" AT&T's customers -- minus the network. Ma Bell still owns valuable relationships with millions of customers.

Yet AT&T is establishing a modern Internet-based network of its own to handle business traffic, notes Rob Carlson of Current Analysis, and it probably would want to tie the sale of the company's older circuit-switch network to the sale of its long-distance consumer customers.

If that's the case, AT&T could end up stuck with its consumer business, which it plans to separate into a tracking stock. While revenue continues to decline, it does generate surplus cash every year, and Ma Bell could broaden its menu to include new services such as high-speed Internet access or local phone calls to generate new growth.

Whatever the outcome, analysts are unanimous about one thing: The 117-year old phone company has already seen its best days. The brand name, however, could carry on for decades to come in its new guises of wireless and cable broadband.