Big changes for a big companyAT&T, the largest telecommunications company and long-distance provider in the U.S, is in the middle of a major transformation once again. By the end of 2002 the company is expected to merge its cable assets with Comcast and split off its consumer unit as a tracking stock. This follows the spinoff of AT&T Wireless in 2001. The reorganization will leave AT&T with just its business unit, which offers voice, data and Internet services to corporate clients.
Bringing people together; splitting apart
In 1876, Alexander Graham Bell announced his revolutionary invention with the words, "Mr. Watson, come here, I want you!" American Telephone and Telegraph, first known as American Bell, has been making the world a smaller place ever since. The company scooped up Western Electric, the largest U.S. maker of electrical equipment, and dominated the telephone industry until 1968, when the FCC broke up its monopoly to allow competitors like MCI into the long-distance arena. Antitrust litigation forced the company's historic break-up in 1984, establishing the seven "Baby Bell" local phone companies, but allowing AT&T to keep its hold on the long-distance market. In the wake of landmark deregulation in the telecommunications industry, AT&T once again split up in 1996, this time into three separate companies: AT&T, NCR, and Lucent Technologies. This move allowed AT&T to concentrate on new communications opportunities such as cellular phone services, Internet access (through the company's WorldNet service) and personal communications operations such as e-mail.
Armstrong in charge
C. Michael Armstrong took the helm in November 1997 at Chairman and CEO. His mission was to change AT&T from a predominantly domestic long-distance carrier to an "any-distance" company with a global reach. The following year he took a step toward that goal with the $11.3 billion purchase of local exchange carrier Teleport Communications Group (TCG), which gave AT&T a boost in the local telephony market. In 1999 AT&T became the leading cable company in the U.S. after shelling out over $100 billion to acquire cable giants TCI and MediaOne. That same year the company beefed up its networking services unit with the $5 billion purchase of IBM Global Network (renamed AT&T Global Network Services). In 2000 AT&T launched Concert, an ambitious $10 billion joint venture with British Telecom that offered telecom service to multinational corporations. From the very beginning, however, Concert was plagued by the decline in tech spending and huge debts. It dissolved the following year.
The latest reorganization
In October 2000 Armstrong announced AT&T would split its wireless, broadband, business and consumer units into four separately traded entities. The breakup was seen, in part, as a way to boost the company's tumbling stock price, by separating the weakening consumer long-distance unit from the other groups. The wireless unit was the first to be spun off in July 2001 following its $10.6 billion initial public offering - the biggest IPO to date. In December 2001 AT&T agreed to merge its broadband unit with cable operator Comcast, instead of spinning it off. The deal, which is valued at about $72 billion, is expected to close at the end of 2002. The new company, to be called AT&T Comcast, will have roughly 22 million subscribers, making it the world's leading provider of broadband services. AT&T's consumer group, which is experiencing rapidly declining long-distance revenue, will trade as a tracking stock. That will leave AT&T with its business unit, which provides voice, data, Internet and consulting services to more than eight million businesses and is the company's biggest revenue generator. The restructuring is expected to be complete by the end of 2002. Once that happens, Armstrong is expected to leave AT&T to head up AT&T Comcast. His likely successor as CEO at AT&T is David Dorman, who is currently the company's president.
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