AT&T Touts Broadband, Wireless to Wall St.12/12/1999 7:00 PM Eastern
New York -- AT&T Corp. said last week that wireless and
broadband services will fuel a revenue gain of 8 percent to 9 percent next year, with new
services leading the way.
At an analysts' conference here last week, AT&T
chairman C. Michael Armstrong said he expected cash flow at the company to be at the high
end of the range of $18 billion to $20 billion and earnings per share to fall by between
$2.15 and $2.20.
Capital expenditures for 2000 are expected to total between
$13 billion and $14 billion next year, and Armstrong also reaffirmed AT&T's commitment
to slash costs by $2 billion in the same period.
On the cable side, AT&T Broadband & Internet
Services president Daniel Somers said total broadband revenue should rise by between 12
percent and 14 percent, with revenue growth at the cable operations in the
high-single-digits. Operating cash flow at the cable operations is expected to be in the
mid- to high-single-digits.
Somers said customer growth in analog cable will be
relatively flat -- between 1.5 percent and 2 percent. However, digital subscribers --
which should total about 1.8 million at the end of the year -- are expected to rise to
between 2.5 million and 3 million in 2000.
Broadband services are also expected to catch on fast, with
AT&T estimating that AT&T@Home will have 277,000 customers by the end of the first
quarter and 700,000 by the end of 2000. The service has about 164,000 subscribers now.
Telephony customers are expected to rise to between 400,000
and 500,000 by the end of next year. Fueling at least some of that telephony growth is the
company's newfound emphasis on fixed-wireless services.
Armstrong said AT&T will begin testing fixed wireless
in three new markets next year, including Fort Worth, Texas. A full-scale rollout is
planned for 2001. But that doesn't mean cable telephony will be abandoned.
AT&T Wireless Group chairman and CEO John Zeglis said
the company will roll out fixed-wireless service only in markets where AT&T does not
have a cable presence or a telephony deal with another MSO. However, he stressed that the
fixed-wireless offering would not be used as leverage to force other operators into deals.
"Fixed wireless is not a club, it's not a negotiation
tactic," Zeglis told reporters at a press conference during the analysts' meeting.
In addition, as expected, AT&T announced its plans to
create a tracking stock for its wireless assets, under the AT&T Wireless Group name.
The company said it would issue proxy statements for the tracking stock in January, with
its initial public offering expected in the spring. If all goes according to plan, full
distribution of the tracking shares could be in the second half of next year.
Although rumors of the tracking stock sent AT&T shares
soaring -- reaching as high as $59 Nov. 29 after languishing in the high $40s for months
-- progress made in the deployment of new services should also help to increase
shareholder value in the future. The stock closed unchanged at $57 Dec. 6.
Somers said the company has targeted $70 in monthly revenue
per customer next year, including new services, and he believes that with the success of
its high-speed-data and digital services, that goal is more than reachable.
He added that the company is marketing digital cable to 100
percent of its video customers, and it is "working hard" to have a retail
presence for cable modems and its AT&T@Home high-speed-data service.
The company also appears to be on track to upgrade its
systems to make those services possible.
Executive vice president and chief technology officer Tony
Werner told analysts that the company's cable network is currently 51 percent two-way, and
it should be 85 percent two-way next year. He added that AT&T earmarked about $2
billion for the basic upgrade, $409 million for the telephony upgrade and $291 million for
network powering in its 1998-through-2000 capital budget.
"We've spent about 40 percent to 45 percent of the
capital," Werner said. "We will end the rebuild on schedule and under
Interactive services are also expected to play a role in
growth. National Digital Television Center president Laurie Priddy said that next year,
AT&T will roll out an interactive product -- as a $15-per-month add-on to the
digital-cable tier -- that will include an interactive program guide, as well as e-mail
and rich-media advertising capabilities.
Priddy said A&T believes interactive services could
push revenue per household to $120 by 2004, with roughly one-third of that coming from