AT&T Wireless leaves the nest

By Denise Pappalardo
Network World, 07/16/01

REDMOND, WASH. - AT&T's move last week to convert its AT&T Wireless tracking stock into common shares will reduce the company's burdensome debt level . . . but not by much.

The company announced that it generated $1.6 billion in the stock transaction that will be used to cut the company's $47.5 billion debt. AT&T expects to bring in an additional $1.4 billion in six months after it converts its remaining AT&T Wireless shares.

While AT&T says its wireless services and management team will not change in light of the spin-off, there is a sense of confusion among some salespeople, says Lisa Pierce, an analyst at Giga Information Group and a columnist for Network World.

AT&T customers have had trouble closing multiservice deals that include wireless services that will contribute to their total annual contract, she says.

AT&T, like most large telecommunications companies, offers users volume discounts if they commit to spending a certain amount on services annually. Users typically can apply multiple services, such as frame relay, Internet access and wireless, to their total volume.

AT&T says there is no change in policy and users can apply wireless dollars spent toward their yearly commitments, but that message is not resonating with the company's sales staff, Pierce says. "Within the last six months, the salespeople have been getting mixed signals and are confused and have been telling users that this isn't true."

While there may be no change in policy, a huge restructuring such as this will at the very least create confusion. As this is the first of the company's planned four-way split, users should expect additional disorder. AT&T announced its restructuring plan last October as a way to reduce overall debt.

Despite Comcast's bid last week to buy AT&T Broadband, the company's cable network division, AT&T says that unit is the next to be split off. Comcast is bidding $45 billion in stock and says it will assume $13.5 billion in debt. AT&T said in a statement that it is not seeking a buyer, but will consider Comcast's proposal to see if it's a better option for shareholders.