AT&T to split itself in four after reversal of strategy

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The Independent Online

AT&T, the biggest American telecoms group, yesterday gave details of plans to split itself into four by the middle of next year,marking an abrupt U-turn in the company's strategy since Michael Armstrong became chief executive and chairman in 1997.

AT&T, the biggest American telecoms group, yesterday gave details of plans to split itself into four by the middle of next year,marking an abrupt U-turn in the company's strategy since Michael Armstrong became chief executive and chairman in 1997.

Mr Armstrong also disclosed that Concert, the global business services joint venture with British Telecom, is not working as well as it could. "Concert is doing what we expect it to do, but it's not doing what we should expect it to do going forward," he said.

Under the break-up plan, AT&T will split into four separately quoted units. The divisions, all to carry the AT&T brand, are: Wireless; Broadband; Consumer; and Business.

AT&T Business will retain the current market listing and AT&T Consumer will be issued as a tracking stock. The other two units will be separately quoted common stocks.

"This is not only the next logical step, but the next necessary step in the transformation of this company," Mr Armstrong said. "These new companies are predicated on the creation of value."

The break-up marks the abandonment of Mr Armstrong's goal of transforming AT&T into a leading unified telecoms and broadband carrier. Pursuing that vision saw AT&T spend $100bn (£71bn) in buying US cable assets and upgrading their ageing networks for voice services.

The restructuring comes as telecoms companies around the world face difficulties coping with rapid technological change, stiff competition and rising investment demands. Concert, both partners admit, was founded on three-year-old market realities now largely rendered obsolete by internet-based technology.

News of AT&T's break-up did not halt the year-long slide in its stock, which fell $3 3/4 to $23 1/8 in mid-afternoon dealing. Since the shares hit a 52-week high of $61 their 62 per cent fall has wiped out more than $120bn in market capitalisation.

As part of the restructuring, AT&T will limit its dividend payment to shareholders in the Consumer unit.

The three other units are likely to refrain from dividend payments in order to plough free cash flow into expansion and investment.

The AT&T break-up comes weeks before BT unveils the conclusions of its strategic review. BT has already reorganised into seven units and has planned to float Yell, its directory services business. A float of BT Wireless and perhaps other divisions is expected in order to raise funds to reduce the company's £30bn debt mountain.

A BT official said yesterday of the AT&T break-up plan: "There are a lot of things to listen to... but we have to work things out for ourselves."

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