AT&T Details Plan to Split into Four Companies

US telecommunications giant AT&T has announced plans to split itself into four separate companies, with a new AT&T Business unit focused on enterprise communications and networking for large corporate users remaining at the core of its balkanized operations.

Under the planned restructuring, AT&T also will spin off its consumer long distance, cable broadband and wireless business units into new entities known as AT&T Consumer, AT&T Broadband and AT&T Wireless. AT&T said its board of directors unanimously approved the breakup plan in a series of meetings this week.

"This is a pivotal event in the transformation of AT&T we began three years ago," said AT&T Chairman and CEO C. Michael Armstrong in a statement. The company will start implementing the restructuring plan by year's end and expects to complete the process of separating the four companies in 2002.

Armstrong added, though, that the new companies will continue to collaborate with each other after they're broken apart. For example, AT&T Business will still bundle the wireless company's services into its offerings for corporate users. In addition, AT&T Business will still use the broadband unit's cable systems in serving some customers and will sell network services to the other three companies.

Mark Liggio, an analyst at Allied Business Intelligence in Oyster Bay, N.Y., said the restructuring should allow AT&T Business to better focus on its high-revenue corporate users. Liggio described the broadband cable business, which Armstrong spent $US100 billion to acquire and develop during the past three years, as "a distraction" that ate up resources and management time within AT&T.

The breakup "should definitely help the enterprise side of AT&T," Liggio said, adding that it "has the most potential" of the four planned companies. Spinning off the wireless unit shouldn't have much impact on users, he noted, because that business already operates separately from the rest of AT&T.

Brownlee Thomas, an analyst at Giga Information Group Inc. in Cambridge, Mass., agreed with Liggio that spinning off AT&T Wireless won't cause problems for users or raise concerns among government regulators. The same applies to the plan to create a separate business-oriented company, she said. AT&T Wireless won't be a problem, even for government regulators.

But separating residential telephone service into a separate business that wouldn't be subsidized by corporate users could mean higher prices for consumers, Thomas added. And that, she said, could pose a regulatory hurdle for AT&T as it tries to implement the restructuring plan.

In recent years, Armstrong "has tried to recreate AT&T in its original form to be everything to everybody," Thomas said. The goal, in part, was to be able to provide a variety of bundled services to business users. But AT&T has grown so large that it became hard to effectively manage all of the company's different parts, she said.

When all four companies have been established, AT&T Business will be the principal unit of what remains of AT&T proper. The enterprise unit will retain AT&T's stock-ticker symbol and be the legal owner of the AT&T brand, which it will license to the other companies.

AT&T Business also will include the AT&T Network and AT&T Labs operations, which will serve the three other AT&T-branded companies as well as other companies under commercial contracts. In addition, AT&T Business will continue to hold a 50% interest in Concert, the international communications services joint venture that AT&T has set up with British Telecommunications PLC.

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