AT&T Broadband to Shoulder Debt Load

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AT&T Corp. provided further details on its planned breakup into four
separate units, revealing in a Securities and Exchange Commission filing Friday
that the bulk of its debt will be held by its cable unit.

In a proxy statement filed May 11, AT&T said about $28.4 billion of its
$65 billion debt load would be allocated to AT&T Broadband. Its AT&T
Business Services unit will have the next highest debt with $27.1 billion.

Although the filing did offer some insight on how AT&T will split up its
debt, it failed to detail how the proceeds from asset sales and the planned
initial public offering of the AT&T Broadband division would be
distributed.

AT&T's stock price has fallen dramatically over the past year, mainly
because of declining profit margins and a debt load that swelled to $65 billion.
The company has pared off about $17.5 billion in debt in the past year, mainly
through asset sales.

When those debt reductions are taken into account, AT&T Broadband's
leverage drops to about $15.6 billion, AT&T spokeswoman Eileen Connolly
said. At AT&T Business Services, the debt load has been reduced to about
$19.7 billion, she added.

AT&T Broadband's debt level could fall even further with the proceeds
from its planned sale of its stake in Time Warner Entertainment, valued at about
$10 billion, and its 30 million shares of Cablevision Systems Corp. stock,
valued at another $2 billion.

Douglas Christopher, an analyst who follows AT&T for Crowell, Weedon
& Co., said allocating additional debt to the AT&T Broadband unit makes
sense.

'That is the specific unit that is responsible for most of AT&T's debt
and the increase in it over the past couple of years,' Christopher said. 'That's
where it should be.'

He added that the additional debt load shouldn't have much of an impact on
AT&T Broadband's ability to raise money for upgrades or other business
activities.

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