Hindery

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AT&T Broadband & Internet Services CEO Leo J.
Hindery Jr. had been hinting for months that his time with the telecommunications giant
wouldn't be long.

Last week -- perhaps a little ahead of his own schedule --
the man who was a key architect of the current cable-ownership landscape left AT&T to
"pursue other interests."

Hindery will stay on as a strategic adviser to AT&T
Corp. chairman C. Michael Armstrong, focusing on acquisitions, clustering and industry
relations.

As AT&T looks to wrap up its acquisition of MediaOne
Group Inc. and struggles to implement a telephony strategy that requires cutting
affiliation deals with other MSOs, Hindery's departure has left operators apprehensive
about his possible successor.

Even with a "cable guy" like Hindery in place,
there had already been signs that AT&T's approach is to do whatever benefits AT&T
without necessarily checking with others in the cable fraternity first.

Although longtime cable executive and AT&T Broadband
nonexecutive chairman Amos Hostetter has agreed to spend more time in Denver -- focusing
on broadband strategy, staffing and industry relations -- industry analysts said Hindery
leaves without a clear successor.

In an interview last Wednesday, Hindery said the move was
Armstrong's idea. "Mike is the CEO," Hindery said. "What was appropriate
yesterday is maybe different than what is appropriate today. I work for him. I believe
this is the right thing to do, or I wouldn't be having this conversation -- I'd just be
gone."

Hostetter said last Friday that Hindery's move "was
inevitable and certainly mutual. It was probably the right outcome for both sides. There
was just a fundamental difference in styles. To anybody who has been close to this, it was
not a question of whether -- it was a question of when."

Hindery's troubles may have begun after a report late last
month in TheWall Street Journal outlined a pending billion-dollar purchase
of modems and set-top boxes from General Instrument Corp. and Motorola Inc.

AT&T executives were said to be furious to learn about
the deal after it was leaked to the Journal and, according to sources, they blamed
Hindery for keeping them out of the loop. AT&T has not publicly acknowledged the deal,
and it is still not clear if it will ever get done.

Shortly after that, reports surfaced that Excite@Home Corp.
-- the data-over-cable company that Tele-Communications Inc. cofounded and that AT&T
partly owns -- was negotiating a sale to America Online Inc.

Hindery publicly dismissed the reports as
"absurd." Less than 24 hours later, AT&T fired off a press release that
appeared to contradict Hindery's statement.

AT&T executives, according to sources, were also not
happy about Hindery's attempt to cut a content deal with Internet portal Yahoo! Inc. --
which conflicted with @Home's partner, Excite Inc. -- and about public comments he has
made criticizing AT&T's hidebound culture.

Then in the days leading up to his departure, AT&T,
according to sources, approached the Federal Communications Commission with a plan that
would allow independent Internet-service providers to gain access to data-over-cable
customers, without running the plan by other operators or the National Cable Television
Association first.

The NCTA and operators have insisted that cable has the
right to cut its own business deals with other ISPs on its own terms.

AT&T's motive, the sources said, was to score points
with the FCC at a time when the commission was reconsidering subscriber-concentration
rules that could put a crimp on the MediaOne acquisition.

Industry executives tossing out names of possible
successors mentioned Bill Fitzgerald, the mergers-and-acquisitions wizard under Hindery
who became TCI's chief operating officer; MediaOne cable CEO Jan Peters; and Carl Vogel,
the longtime cable executive who recently became COO of AT&T Broadband's data
operations.

AT&T senior executive vice president and chief
financial officer Daniel Somers will run AT&T Broadband's day-to-day operations in the
interim. But Somers said the company was conducting a search for a permanent replacement.

Although Hindery was well regarded, analysts didn't see his
departure as a crushing blow to AT&T. The company's stock actually ticked up $1.37 per
share after the news came out last Wednesday, closing at $46.50 -- still well below its
52-week high of $64.13.

"It's a disappointment," SG Cowen Securities
Corp. cable analyst Gary Farber said of Hindery's departure. "He was 'Mr. Cable Guy'
to some extent in the industry. To the extent that he's not going to be that anymore, it
doesn't create a vacuum: It creates an opportunity for somebody in the group to assume the
mantle. Maybe it's an AT&T guy, but it's probably an operations guy -- a
nuts-and-bolts cable/new services guy."

The Yankee Group telecommunications analyst Brian Adamik
expected Hindery's successor to come from outside. "They need a broadband guy, and
right now, they don't have one," he said. "Amos [Hostetter] is more of a company
builder. The question I have is: Does Malone come in and be the interim head? It boils
down to protecting a major investment he has. It's certainly a possibility."

In a telephone interview, Somers said there was no chance
that Malone would assume a more active role in the day-to-day operations of AT&T
Broadband.

"I think he's enjoying his media business," he
said. "We're happy to have him on the board. I don't think there is any desire on
John's part to do anything different than what he's doing now."

Malone did not return phone calls seeking comment.

In a Forbes article, however, AT&T's biggest
shareholder indicated a distinct displeasure with the company's stock's performance and
jawboned for a tracking stock tied to the cable and Internet assets.

AT&T has been rumored to be considering a tracking
stock for its cable assets -- a strategy it abandoned shortly before it closed its
acquisition of TCI in March, but one that it may be reconsidering.

A tracking stock could also help to attract top candidates
for Hindery's job. "If you make it a tracking stock, maybe you're also able to treat
the company almost as a separate entity and make decisions without having to worry about
the ripple effect throughout the rest of the corporation," Adamik said.

Hindery would be a hard act to upstage. A bootstrap
millionaire who got started in the mining industry after graduating from Stanford
University Business School, Hindery built his first cable company, InterMedia Partners,
into a top MSO before Malone brought him in to run TCI in December 1997.

His task was to transform the company from a sprawling
behemoth with outdated plant and serious customer-service problems into a tightly
clustered, attractive takeover target.

Hindery made a big impact. As he noted during a recent
public appearance in Hartford, Conn., he swiftly fired about two-dozen senior TCI
executives in order to build his own team.

With the help of M&A specialists like Fitzgerald, he
swung dozens of system sales, swaps, buys and joint ventures that reshaped the industry by
creating large regional clusters with the needed scale to support new services.

But the dealmaking pace has slowed down since AT&T took
over, with the notable exception of the MediaOne acquisition and related systems sales to
Comcast Corp., which AT&T outbid for MediaOne.

Hindery said about one-dozen side deals are pending. But as
the number of deals began to dwindle, the personality conflicts began to grow.

Hindery downplayed speculation that he and Armstrong had
locked horns over certain issues.

"I'm not unopinionated," he said. "If I
didn't have as much affection and respect for Mike Armstrong as I did yesterday, again,
I'd just go. He really is an exceptionally gifted CEO who has a brilliant strategy that
deserves everybody's support to be successful. This is the conclusion that he's come to. I
support it. I'm happy to go down this route if that's what he wants done."

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