AT&T Margins Hurt by Excite@Home Switch

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Cash-flow margins at AT&T Broadband, thought to be on the upswing, took a
turn for the worse in the fourth quarter as a result of additional costs
associated with the transition of its high-speed-data-service subscribers from
Excite@Home Corp.'s network to its own.

Already the worst in the industry, cash-flow margins at AT&T Broadband
were down 2.2 percentage points in the fourth quarter to 22.9 percent compared
with 25.1 percent in the third quarter.

AT&T Broadband's peers in the cable industry average cash-flow margins in
the 40 percent to 45 percent range.

In a press release, AT&T Broadband said the lower margins were 'due to
additional expenses and customer credits related to the migration of more than
900,000 customers from the Excite@Home network to the new AT&T Broadband
high-speed network.'

Excite@Home filed for bankruptcy protection in September and shut down its
network in November.

The MSO added 568,000 new revenue-generating units in the fourth quarter.
Data subscribers increased by 130,000 to 1.5 million and digital-video customers
rose 335,000 to 3.5 million. The company also added 103,000 cable-telephony
subscribers in the quarter, finishing the year with 1 million customers.

Basic-subscriber growth declined about 1 percent in the period, or by some
88,000 customers, to 13.56 million.

'Basic performance did not come in at an acceptable level,' AT&T Corp.
chairman C. Michael Armstrong said in a conference call with analysts.

He added that initiatives at the unit to upgrade its systems and improve
customer service should reverse that trend.

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