Article 9 of 352
AT&T's plan disconnected
Sonya Colberg
The Daily Oklahoman
Page 1-C
Copyright 2000 The Oklahoman Publishing Company. All Rights Reserved.

AT&T's one-stop shopping plan made it king of the Internet economy.

Now, the company is dismantling its plan and dividing into four separate companies. Along the way, it is eliminating its $100 billion telephone and cable television empire that it spent three years building.

"This is really kind of a strange development," said John C. Roberts, law professor at DePaul University in Chicago. "It's one that most experts would not have anticipated. Only a year ago, everybody was saying that AT&T had the secret for success in the new world and that the move to go into cable was the smartest thing they ever did."

Oklahoma investors and consumers need to be cautious, said Tulsa-based analyst Fred Russell.

"It's kind of like a reverse vasectomy," Russell said. "They're undoing everything and expecting the consumers to be patient and understanding, while abandoning all deserved skepticism."

He said AT&T's strategy to group all its services and consolidate management was ill-conceived.

Consumers want to know what each service costs. The bundled bill makes it very difficult to determine what they're paying for each service, Russell said.

The telecommunications giant set the trend for the industry as it developed a bundling or one-stop shopping plan. It spent $100 billion to buy cable giants TCI and MediaOne and also formed other cable partnerships. The idea was to upgrade the cable systems to offer telephone, television and Internet service over their cable lines.

Analysts said AT&T was brilliant in its effort to go around the local phone companies and get access to homes through cable, Roberts said.

In the next 12 to 24 months the company will break into four distinct entities, including an independent cable company and an independent wireless company, all operating under the AT&T brand name, spokeswoman Sue Fleming said. She said the action was taken for many reasons.

"It lets each business be more agile in introducing new services and competing in their own markets than perhaps they can when you're part of a large corporation," Fleming said.

Roberts said the long-distance business is just old fashioned.

"Everybody has lost confidence in long distance as a business," he said. "I think that is one of the reasons why AT&T stock has been dragging so terribly. It's not that it's not profitable. It's not as profitable as investors would like to be in an Internet economy."

Investors will find even more reason for being fickle.

When asked if the combined dividends paid by the four new stocks is expected to be less than the current 88 cents per share, spokesman David Caouette said, "I believe that is a fair statement."

He said, though, that AT&T will be exploring different growth opportunities and intends to review the dividend policy.

Already, the stock market refuses to bless the AT&T deal. The stock has been falling. On Wednesday, it closed at $23.38, near its 52-week low of $21.25 and well below its high of $61.

AT&T also warned that it would earn 29 to 33 cents per share in the fourth quarter ended Dec. 31. Analysts were expecting 36 cents per share.

Russell said the stock tumble is no surprise.

"I have read the AT&T proposal," Russell said. "My IQ is not high enough to figure out what investors will get out of this. I think the consumer is entitled to clarity and, from the investor or consumer point of view, he or she is not getting it."

Meanwhile, millions of consumers could take a hit when the deal is completed over a few years, said Nicholas Economides , professor of economics at New York University's Leonard N. Stern School of Business.

"There was a real possibility if AT&T would provide phone service by using cable, local service prices would fall, service would increase, high-speed Internet would be available at low prices," Economides said. "These are the good things that might go away."

He said that would change if some other company is in control of the cable service.

"That means it may be that the possibility of a second line to your home will get eliminated, and you'll get stuck with your local telephone provider," Economides said.

Analysts were uncertain of whether other telephone companies would follow AT&T's lead. However, Bill McCloskey, spokesman for Bell South, said the company is not abandoning its bundling strategy.

"You can't be all things to all customers, but that doesn't mean you can't try," he said. "When Bell South gets into long distance, which we hope is soon, we plan to offer a bundle of services because we believe that is what customers want."

AT&T has some 1,000 employees in Oklahoma, most with the wireless unit in Oklahoma City. Another 650 employees will be hired by the end of 2001 to work out of the Oklahoma City offices.


An AT&T breakup? - AP GRAPHIC

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