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AT&T Broadband Finally Breaks Even

As Capitol Hill debates the regulatory implications of AT&T Corp.'s plan to sell AT&T Broadband -- the largest cable system in the country -- to Comcast Corp. , the business is looking more like a diamond in the rough for AT&T.

In first quarter 2002 results released Wednesday morning, AT&T said its net loss increased to $975 million, 28 cents a share, from $192 million, 10 cents a share, in first quarter 2001. It also reported that its revenue fell to $12.02 billion, a drop of 8.4 percent on a pro forma basis, in the quarter. But the company laid most of the blame for the decline on its continuing struggles in long distance voice services, noting that the revenue declines were offset by growth at AT&T Broadband, primarily in high-speed data, telephony and digital video.

AT&T said AT&T Broadband recognized $2.44 billion in pro forma revenue in 1Q 2002, a 13.9 percent increase over 1Q 2001, adjusted for significant cable acquisitions and dispositions, as well as the deconsolidation of Excite@Home.

AT&T also noted growth in data/IP/managed services and local services in its AT&T Business unit, though pro forma revenue declined 8 percent to $6.53 billion in 1Q 2002 as compared to 1Q 2001.

"AT&T Business experienced solid growth in packet and local services, despite challenging economic conditions," said AT&T Chairman and Chief Executive Officer C. Michael Armstrong. He added, "And AT&T Broadband reached an important milestone as cable telephony reached the EBITDA break-even point. The unit also hired and trained approximately 1,000 new customer service representatives and added more than half a million new telephony, high-speed data and digital video customers."

Looking ahead, the company expects its second quarter revenue to decline another 8.4 percent, and also expects AT&T Broadband's second quarter revenue to grow about 10 percent compared to 2Q 2001 -- growth which it expects will be the low point of the year for the unit. It anticipates third and fourth quarter growth rates to increase from there, ending the year with full-year revenue growth in the low double digits.

Meanwhile, senators are taking a hard look at the proposed AT&T-Comcast merger. The senators have little official power over whether or not regulators approve the merger, though regulatory and antitrust authorities do tend to pay close attention to lawmakers' wishes.