Article 2 of 352
Extra Dividends
Barnet D. Wolf
The Columbus Dispatch
Home Final
Page 01F
(c) Copyright 2000 Columbus Dispatch. All Rights Reserved.

Neil Sedaka once sang, "Breaking up is hard to do.'' Note to the graying pop singer/songwriter: Not always. At least, not when it's the third time around.

Corporate giant AT&T was warbling from a different songbook last week when it decided to abandon its $100 billion effort to create one-stop shopping for communications services. Instead, it will separate into four distinct public entities by 2002.

In effect, AT&T is admitting that its business philosophy of the past three years will not be able to result in the types of synergies and opportunities required in the fast-changing telecommunications universe.

Under plans for the breakup, the new AT&T would consist of the company's telecommunications network and business-services division. It also would have a separately traded subsidiary that includes the long-distance phone operations.

Two other companies, which will continue to use the AT&T brand name, will consist of independent cable and wireless businesses.

This breakup will be the third major restructuring for the one-time national telephone monopoly.

The first occurred in 1984, when a federal court ordered AT&T to spin off its local phone business into several regional companies. Because of mergers, only three of these so-called Baby Bells remain.

Four years ago, the company decided to divide into three companies, spinning off Dayton-based NCR Corp., which AT&T acquired in 1991, and also the equipment and Bell Labs research businesses, renamed Lucent Technologies.

The impact of the company's latest decision is wide-ranging on several levels. For instance, AT&T at last count had 163,000 employees, and thousands of them likely will have their lives altered by the decision to split up.

The telephone company's decision could slow the expansion of local phone service through cable, according to Nicholas Economides , a professor at New York University's Leonard N. Stern School of Business.

AT&T's strategy was basically good, Economides said, and it "gave hope to consumers'' that the local residential phone monopolies would face competition.

But "if the cable company has to carry a lot of debt (from previous acquisitions), its ability to raise capital will be hampered,'' he noted. "That could postpone a move into local service or cause it to never happen.''

AT&T is also one of the nation's most widely held stocks -- it's ranked second, fourth or fifth, depending on what source is used -- so what happens to the company affects millions of American investors.

Shareholders will be flooded with stock from the new companies, and they also will be hit with the realization that the dividend paid by the four stocks combined is likely to be substantially less than the current 88 cents a share.

Just as in the previous AT&T restructurings, this breakup should provide a bonanza for accountants figuring out the cost basis of all these shares.

Anyone who owned AT&T stock before 1984 probably needs a flow chart to keep track of all of the company's business alterations. Notification letters of all of the deals alone have been enough to keep the U.S. Postal Service in the black.

For the Baby Bells, quite a bit has changed in 16 years.

Southwestern Bell, since renamed SBC Communications, acquired fellow regional operating company Pacific Telesis in 1996, and then Ameritech, originally American Information Technologies, was acquired last year.

Bell Atlantic bought fellow Baby Bell Nynex in 1997 and changed its name this year to Verizon Communications after a non-Bell merger. Another regional operating company, US West, was acquired this year by Qwest Communications.

The only Baby Bell that hasn't gone through the adolescent merger-and-acquisition wringer has been Bell South. Ma Bell's later offspring, NCR and Lucent, haven't, either.

There are also grandchildren that have provided one-time AT&T shareholders with even more stock over the years. The first was AirTouch, a cellular phone company spun off in 1994 from Pacific Telesis and since acquired by Vodaphone.

Cable TV operator MediaOne was freed by US West in 1998 and was incestuously purchased this year by AT&T itself. And just this month, Lucent spun off its office telephone systems business, renamed Avaya.

While most of these moves may make business sense, they don't create a sense of job security. And in Ohio, AT&T, SBC, Lucent and Qwest, along with NCR, combine to employ tens of thousands.

Meanwhile, Lucent, Avaya, SBC, Bell South, Qwest and NCR -- like AT&T -- are among the nation's 25 most widely owned stocks, according to a recent survey by market data company Standard & Poor's.

That means thousands of shareholders who kept their AT&T and spinoff stock certificates over the years have created a lot of overstuffed bank safe-deposit boxes.

With all this buying, selling and spinning-off activity going on, it's understandable if some shareholders are left mumbling some of Sedaka's other, more pointed lyrics: "Doo-do-do dum-dooby do-dum-dum.''

Barnet D. Wolf -- -- writes about business issues for The Dispatch.


Copyright © 2000 Dow Jones & Company, Inc. All Rights Reserved.