AT&T Corp. took a $13.1 billion noncash charge to earnings in the second
quarter, reflecting the declining value of its AT&T Broadband cable unit,
which sent other MSO stocks into a tailspin.
In releasing its second-quarter results, AT&T said it took the charge --
which resulted in a net loss of $12.7 billion, or $3.49 per share, for the
period -- as a result of new accounting rules that require companies to write
down goodwill asset impairments all at once.
Without the charge, AT&T would have reported earnings of 7 cents per
share for the period.
At the AT&T Broadband unit, revenue rose 9.8 percent to $2.53 billion and
cash flow rose 59 percent to $641 million. AT&T Broadband's cash-flow margin
(cash flow as a percentage of revenue) -- among the lowest in the industry --
improved by 5 percentage points in the period to 25.4 percent.
In a conference call with analysts, AT&T Broadband CEO William Schleyer
said the cable unit added 105,000 new telephony customers, 202,000 digital-video
subscribers and 137,000 high-speed-data customers in the period.
He added that his only disappointment was the loss of basic customers, which
he said was due mainly to seasonality (or the loss of subscribers as college students and part-time residents disconnect their cable service when they leave those residences for the summer) and increased competitive pressures in
Schleyer said the company is working hard to rebuild its network -- of the
$950 million in capital spending in the period, 45 percent was directly related
to the rebuild.
The asset-impairment charge for the cable unit caused a near panic in the MSO
sector, with five other publicly traded cable companies -- and AT&T --
reaching 52-week lows.
AT&T dropped as low as $8.75 per share during the day, rising slightly to
close at $8.77, down 75 cents. Other stocks hitting 52-week lows included
Charter Communications Inc., Comcast Corp., Cox Communications Inc., Cablevision
Systems Corp. and Mediacom Communications Corp.
\u0007 Charter dropped more than 20 percent, or 74 cents per share Tuesday, to
$2.42 each before rallying to close at $2.66, down 50 cents.
\u0007 Cablevision fell $2 each in early trading to $6.80 per share before closing
at $6.87 (down $1.93).
\u0007 Comcast dropped $2.80 each to $18.25 before closing at $18.40 (down
\u0007 Cox lost $4.23 per share in early trading before closing at $24.49 (down
\u0007 Insight Communications Co. Inc. fell as low as $10.18 before rallying to
$10.60 (down $1.50).
\u0007 And Mediacom hit bottom at $4.31 each before closing at $4.32 (down