News

AT & T Pumps Up New-Service Numbers

7/30/2000 8:00 PM Eastern

Fueled by growth in its digital-cable, high-speed Internet and cable-telephony segments, AT & T Broadband reported pro forma revenue and cash-flow growth of 10 percent and 6 percent, respectively, for the second quarter.

Pro forma revenue at AT & T Broadband was $2.4 billion in the period and pro forma operational cash flow rose to $556 million.

Overall, AT & T Corp. reported revenue of $16.2 billion, up 4.5 percent, and earnings of $1.9 billion, or 57 cents per share, compared with $1.6 billion (49 cents) a year ago. Those results include Media-One Group Inc., which AT & T acquired in a deal that closed shortly before the end of the second quarter.

AT & T Broadband added 200,000 digital subscribers in the period, ending the quarter with 2.2 million digital customers. The MSO's high-speed-data customer count nearly tripled to 689,000. Cable-telephony customers also rose to 224,000, up 137,000 subscribers from the previous quarter.

AT & T Broadband finished the quarter installing about 1,800 customers per day-now about 2,000 per day-and it is on track to meet its goal of 1.1 million high-speed-data customers by the end of the year.

The numbers at AT & T Broadband were not so rosy after MediaOne's results were stripped away, though.

Operating cash flow at AT & T's cable unit declined by 13.6 percent to $376 million, according to the company's earnings commentary. That comes on the heels of a 19.4 percent decrease in the first quarter.

Revenue at the broadband unit was $1.6 billion, up 10.4 percent, after an 8 percent increase in the first quarter.

AT & T Broadband alone accounted for 101,000 of the combined 224,000 cable-telephony customers, according to the earnings commentary.

AT & T Broadband president Dan Somers said the enlarged company passed the 250,000-telephony-customer threshold last week, halfway to its target of between 500,000 and 650,000 telephony subscribers by year-end. He added that the MSO was averaging about 1,300 truck rolls per day for telephony service during the second quarter-a number that has since risen to 1,600 per day.

Somers was also pleased with AT & T Broadband's revenue-generating units-digital-cable, high-speed-data and telephony customers-which were up 43 percent from the second quarter of 1999. Somers added that year-to-date, AT & T Broadband had 866,000 new RGUs.

But analog-cable-customer growth was flat, and Somers said changes would be made.

"I'm not pleased with our lack of progress in basic analog growth," Somers said in a conference call with analysts. "We're looking hard at this issue, and we will begin implementation of an aggressive new marketing program to drive basic-customer growth and achieve 1 percent to 1.5 percent growth by year-end."

Somers added that a recent plan to win back direct-broadcast satellite customers was making progress, with about 700 customers in the Denver area switching back to digital cable as part of the program. He said the trial has been in place for about two months and, after another month of evaluation, it would be rolled out to other markets.

In the incentive program, AT & T Broadband offers DBS subscribers about $200 in free programming if they switch back to cable.

AT & T stock rose slightly on the quarterly earnings news, closing at $33.94 July 25, up 63 cents per share. The stock fell $1.19 in afternoon trading July 26 to $32.81 per share.

AT & T chairman C. Michael Armstrong also addressed a recent article in The Wall Street Journal in which AT & T board member and Liberty Media Group chairman John Malone urged AT & T to divest its stake in Time Warner Entertainment and to get more heavily involved in programming.

Armstrong said he understood that Malone was speaking out mainly because AT & T's stock has been hit hard, dropping more than 40 percent since March. He added that it was unusual for a board member to speak out in the media, but said he was pleased with Malone's statements.

"John was trying to be helpful. The enterprise's complexity, or whatever other reasons might exist, are not enabling the AT & T share price to reflect the kind of assets we have and the potential we're starting to scale to now," Armstrong said in the conference call.

"Secondly, he was trying to be supportive of the strategy," he added. "I was appreciative that he was very supportive of the management team, as well. I was frankly very pleased with his supportive statements."

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