Article 2 of 352
ONLY THING ABOUT AT&T
THAT WON'T CHANGE IS CHANGE
Barnet D. Wolf
The Columbus Dispatch
(c) Copyright 2000 Columbus Dispatch. All
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
Two other companies, which will continue to use the
AT&T brand name, will consist of independent cable and
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
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 -- email@example.com -- writes about
business issues for The Dispatch.