AT&T wireless spreads its wings

Associated Press

SEATTLE – Investors gave the latest AT&T Corp. offspring a cool reception Monday, pushing shares of the newly independent AT&T Wireless Services down nearly 3 percent.

The 10th company to be spawned by the former U.S. telephone monopoly, AT&T Wireless is the first step in AT&T’s sweeping breakup plan announced in October.

Analysts were generally positive about the spinoff, saying it would allow the company to grow quickly and efficiently.

“It’s definitely, from an AT&T Wireless point of view, good news,” said Luiz Carvalho, an analyst with Morgan Stanley Dean Witter. “It gives the company the flexibility to kind of choose its own destiny.”

The spinoff also gives AT&T Wireless much-needed autonomy from its former parent company, a telecommunications giant with interests ranging from traditional phone lines to cable operations.

“Publicly traded subsidiaries of national companies generally have internal conflicts that are never that apparent to subscribers,” said Thomas Lee, an analyst with J.P. Morgan in New York. “They can now focus as a wireless company.”

AT&T Wireless chairman and chief executive John Zeglis is confident the company has the brand name, the newfound flexibility and the business strategy to dominate the wireless field.

“This is the defining industry for communications in the 21st century and we are only now getting to the steep part of the growth curve,” Zeglis said in an interview.

With that newfound autonomy, Zeglis said the company, which starts out with about 29,000 employees and is based in suburban Redmond, will move aggressively into the so-called “third generation” of wireless services, using more sophisticated infrastructure to allow such services as text messaging and wireless Internet connections.

The spinoff was announced in October when AT&T aborted its bid to create a one-stop telecom shop by purchasing cable TV systems and upgrading them for phone and high-speed Internet service.

AT&T Wireless, the nation’s third-largest cellular provider, had about 15.7 million subscribers at last count, up from about 2 million when AT&T agreed to acquire McCaw for $12.6 billion in August 1993.

A new common stock representing AT&T Wireless was distributed as a special dividend to all AT&T investors before the start of Monday’s trading at a rate of 0.3218 wireless share for each regular AT&T share.

At the same time, all of the so-called “tracking” shares that AT&T issued last year to represent the wireless business were replaced on a one-for-one basis with AT&T Wireless common stock. The tracking stock closed Friday at $17.15 per share, so the stock dividend of 0.3218 wireless share was worth $5.52.

Shares in AT&T Wireless were down 59 cents at $16.56, in trading Monday on the New York Stock Exchange.

Meanwhile, as part of the process, the price of AT&T’s regular stock was adjusted lower by the same amount. Shares of AT&T surged in early trading Monday, up $1.98 at $18.70 on news that Comcast Corp. was making an unsolicited bid – now valued at $41 billion – for its broadband unit.

Because AT&T is one of the most widely owned stocks in the country with nearly 5 million shareholders, AT&T Wireless will instantly join the same ranks through the special dividend to those investors.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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