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AT&T Wireless Speeds Acquisition

AT&T Wireless executives say the company's revenues are going to take a hit in 2002, in part attributable to an early close on the $4.7 billion acquisition of TeleCorp PCS .

Four months earlier than expected, the stock and debt payment acquisition of one of its former affiliates puts the onus of paying for the buyout in AT&T Wireless' lap now instead of the middle of summer.

TeleCorp is more generally known for its digital wireless phone service, SunCom, which provides service to 14 states in the U.S. and Puerto Rico. Before the merger, AT&T Wireless owned 23 percent of the company.

Mohan Gyani, AT&T Wireless president, said the early acquisition helps the combined company post mid-teens services revenue growth in 2002.

Without the combined revenues of the two companies, AT&T Wireless growth would be in the low teens, below its guidance given at fourth quarter and year-end reports.

"Closing the TeleCorp acquisition four months earlier than originally planned will enable us to accelerate the integration of TeleCorp's product offers and operations with ours,'' he said. "While we'll have earlier-than-planned transition costs, the good news is we'll be better positioned for 2003."

The true cost of the early merger will be felt in the company's bottom line, however. The $2.4 billion in cash and $2.1 billion in debts will substantially eat into AT&T Wireless' earnings before interest, taxes, depreciation and amortization (EBITDA), the Wall Street performance standard for reporting profits.

Because of the buyout will drop AT&T Wireless' EBITDA performance growth to the low- to mid-20s, dependent on market conditions during the year. Factors affecting market conditions include the current economic downturn and competition from other digital wireless phone providers.

Joe McCabe, AT&T Wireless chief financial officer, said he looked at the company's first quarter results and determined his financial projections put AT&T Wireless a little higher than what they are reporting, which should give them enough room in the event of a bad year.

When I reviewed first quarter analyst expectations for mobility services revenues and EBITDA, I found them to be on the high side by about $100 million on both," he said. "With 10 months left in 2002, we continue to remain confident that we have the operational plans in place to deliver the full-year guidance updated today."

AT&T Wireless is the third largest digital wireless phone company in the nation, behind Verizon Wireless and Cingular Wireless. Company officials expect to have 21.6 million wireless phone customers by the end of the year.