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AT&T Announces Company Breakup

Nearly 18 years after its court-ordered breakup, AT&T Corp. is breaking up again, this time by choice, into four separately held public companies it was announced Wednesday.

In 1982, AT&T was ordered to split into one long-distance company and seven regional bell operating centers, or Baby Bells, to conform with the government's anti-trust regulations.

Wednesday's announcement effectively calls for an AT&T breakup into four "Tiny Ts" as some investors are calling them.

The four companies will retain the AT&T brand and operate, when restructuring is complete in 2002, on an exclusive basis for the next five years. An outside committee of board members will track the four company's dealings to ensure the prices are charged at a competitive rate.

AT&T Wireless and AT&T Broadband are the two most successful units of the AT&T company, and will trade on common stock. AT&T Consumer and AT&T Business will both operate under the tracking stock of AT&T.

AT&T Business remains as the principle unit of AT&T. Consumer, Broadband and Wireless will buy all its network services from AT&T Business.

C. Michael Armstrong, AT&T chairman and chief executive officer, said in a press conference Wednesday the announcement is just a continuation of the strategy it has pursued since 1998.

"All morning long, since the announcement, there have been a number of questions regarding the structure of the deal," Armstrong said. "In my view, structure serves strategy, and we've been pursuing that strategy since 1998 on a consistent basis. In that time, we've acquired 20, 30 companies that build on that strategy.

"These four new businesses represent our consistency in our strategy," Armstrong continued. "To best serve that strategy, we have changed the structure."

Before today's announcement, Armstrong said he met with William Kennard, Federal Communications Commission chairman, to address any possible regulatory hurdles.

"I met with Kennard and assured him of our commitment to our customers and that the deal would ultimately benefit the shareholders and customers," Armstrong said. "He said that he didn't see any problems to the split."

Common stock AT&T shareholders have the opportunity to trade their stock in for its equivalent in the AT&T Wireless tracking stock. Officials say they will exchange at least $10 billion of its economic interest in AT&T Wireless shares. Shareholders already hold a 15 percent stake in the fledgling company.

The company's board of directors will oversee the capital structure and dividend policy appropriate to each of the new companies.

It's expected that AT&T Business and AT&T Consumer will lean more towards dividend returns to shareholders. AT&T Wireless and AT&T Broadband, which has seen its business explode the past year, is expected to invest most of its earnings back into the company for growth.

Wall Street's reaction to the announcement wasn't as rosy a picture as AT&T officials were hoping.

Goldman, Sachs & Co. was one of only a few investment firms who looked at the disintegration of AT&T as a positive step.

"AT&T's 4-way split lays the foundation for improved operations and long term value for shareholders," its initial report stated. "We see the dis-aggregation of AT&T as arealistic response to the changing nature of telecom, and a forwardlooking move to operate each segment more effectively. While thecombination of wireless, broadband, and long distance services seemed a compelling mix a couple of years ago, market pressures, the intractable decline of voice revenues, and the inability to assemble a national cable footprint (via owned and allied properties) makes the solution announced today an appropriate step."

Goldman's efforts to soo



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