Opting to focus on digital subscriber line growth, BellSouth Corp. said it plans to abandon wireless-video offerings and will instead opt to provide customers with direct-broadcast satellite service from EchoStar Communications Corp.
In November, BellSouth said it was re-evaulating its video businesses in line with plans to triple its DSL customer base in 2001, to 600,000 from 200,000. The telco had said an existing capital expenditure budget of $5.5 billion to $6 billion would accommodate the shift.
In a press release on Dec. 19, BellSouth said the shift-to start in January-would affect only 80,000 wireless-video customers. The telco will continue to serve its 40,000 wireline video subscribers.
BellSouth will recognize total after-tax restructuring charges of between $350 million and $375 million. Most of that cost will be taken in the fourth quarter, with the remainder occurring in 2001 as the wireless-video operations undergo transition.
BellSouth also will scrap plans for the direct-to-home satellite offering it planned to launch later this year in conjunction with General Electric American Communications Inc. GE Americom had already launched one of two satellites for the service in October.
Company spokesman Dave Blumenthal said that DTH service would be scrapped but would not discuss any potential breakup fee payable to GE Americom, citing ongoing negotiations. Some published reports said the breakup fee could run into the tens of millions of dollars.
BellSouth was one of the last video holdouts among the regional Bell operating companies. SBC Communications Inc. discontinued video operations in California and has been looking to sell its former Ameritech New Services Group cable properties. Verizon Communications, the former Bell Atlantic Corp., gave up on wireless cable years ago in favor of reselling DirecTV Inc. service and is looking to discontinue a cable overbuild in Connecticut.
Qwest Communications Inc., which purchased U S West Inc. earlier this year, has said it will not expand a video DSL offering in Phoenix beyond that city, despite making inroads against Cox Communications Inc.'s cable system there.
BellSouth delivers video entertainment services three ways: via MMDS (multichannel multipoint distribution service), or wireless cable; by fiber to the curb; and by fiber to the home. It claims a total of about 120,000 video customers in 11 markets.
BellSouth had been one of the more aggressive RBOCs in terms of rolling out video. It turned its first wireless cable system on in 1996, under the Americast brand.
The company provides MMDS-based digital video services in six markets-Atlanta; New Orleans; Vestavia Hills, Ala.; and Jacksonville, Orlando and South Florida.
Right now the emphasis is on expansion of DSL, for which there is rapidly rising demand. "Where the strongest customer growth and demand is, is currently with DSL," BellSouth spokesman Jeff Battcher said.
Crowell Weedon & Co. analyst Douglas Christopher said de-emphasizing the video business was a good idea for BellSouth and other telephone companies.
"The best thing they can do is to focus on leveraging their key assets," Christopher said. "That's where they are likely to get returns.
"Trying to get into the new businesses and listening to Wall Street and the hype of new technologies will just distract them."