Poor AT&T they have to to revive Angel to get investor interest....
From the December 13, 1999 issue of Wireless Week
AT&T Talks Up Growth
By Monica Alleven
NEW YORK—The Angel is back, and it's destined to become a core element in AT&T Corp.'s salvation.
After four or five years on a backburner, AT&T Wireless Services' once-ballyhooed, sometimes-ridiculed Project Angel is getting reheated, reinvented and
reinvigorated. AT&T Corp. Chairman and CEO Michael Armstrong lauded the new fixed wireless technology during a meeting with Wall Street analysts here last
week–a meeting AT&T dubbed “It's all about growth” that was nearly all about wireless.
With dramatic drops in long-distance prices and some Wall Street analysts less than enthused about AT&T's cable strategy, AT&T is reaching for a little sizzle from
the wireless heat wave. Its move could come just in time, for Bell Atlantic Mobile is poised to grab the national spotlight when it rolls out the Vodafone
AirTouch/GTE Wireless/PrimeCo venture next year with an eye-popping 20 million customers–far larger than AWS' 12 million.
Wireless, both fixed and mobile, dominated discussions last week as AT&T announced the new wireless tracking stock. The tracker is expected in the spring, and
will include AT&T's mobile voice and data services, fixed wireless, international expansion and e-business. All this, and a new executive lineup to boot.
Heading up the new AT&T Wireless Group will be John Zeglis, the current corporate president; he will serve as chairman and CEO of the group. Dan Hesse, who
has worked under Zeglis for two years, remains president and CEO of the AWS mobile unit, but he also becomes executive vice president of the new wireless
group. Michael Keith, president of AT&T Business Services, moves to the wireless group as executive vice president in charge of developing and launching the
nationwide fixed wireless business in markets where AT&T-branded cable services aren't available.
AWS' success with Digital One Rate is well known, as is the growth overall for wireless and the huge uptick in wireless stocks. A wireless tracking stock is one way
for AT&T to unlock the value of that high-growth business and separate wireless from the earnings-per-share-driven wireline business. And an AT&T wireless initial
public offering could end up being the largest ever in the United States– raising $8 billion to $10 billion. AWS can use that capital for further network expansion,
capacity upgrades and acquisitions.
What's not so well known is the evolution of Angel, originally dubbed “Project Angel.” AWS unveiled a not-quite-ready-for-prime-time version of the technology a
few years ago, when it was still considered primarily a way to bypass local access charges and get into homes. In Chicago, trial users put a pizza box-sized antenna
on the side of their home, and they could receive up to two lines of voice service. But a full-scale commercial product never emerged. The challenge? Getting voice
quality to sound comparable to wireline and add data capabilities.
So a team of engineers went back to work. Now the new and improved version will encompass both voice and data, rivaling digital subscriber line quality, speed
and price, allowing users to keep their computer linked up to the Internet all day while using their home phone. Already, trial users in Dallas rave about the service.
Selected neighborhoods in Fort Worth, Texas, will get the service early next year, with a rollout in at least two more unidentified markets in 2000. A full-scale rollout
comes in 2001.
Competitors such as Nextlink Communications Inc. say they aren't threatened by AT&T's new Angel strategy. Angel is geared toward homes and small businesses,
while Nextlink is gunning for big business and corporations. In fact, the faction most likely to disparage Angel is cable operators. AT&T says it will use its
fixed-wireless strategy to reach homes and small businesses anywhere it doesn't have cable or cable agreements, which is about 50 percent of U.S. markets. That,
analysts say, clearly means AT&T will use fixed wireless as a leveraging point in deals with other cable operators; AT&T can merely say it will use fixed wireless if a
cable operator doesn't want to play on AT&T's terms. Of course, AT&T denies it will use Angel as a “club” in those negotiations.
So what happened since those early, struggling days of Angel, a project that some industry insiders long labeled a joke? Armstrong joined the company two years
ago, and soon after, he met with AWS staff in Kirkland, Wash. At the time, Project Angel cost about $1,100 per installation. He directed AWS to stop deployment
and go back to the lab to develop a lower per-subscriber cost scenario.
Now the cost is $750 per customer, and that number will drop to $500 in five years. The hero? Armstrong last week singled out Larry Seifert, senior vice president
of the wireless local technology group, as a great driving force behind the changes. But there was another big change– namely, the Internet. “As we were evolving
the product, the market was evolving, and the importance of data and the significance of the Internet were forcing us to emphasize data to a much greater extent than
the original concept,” explains Lew Chakrin, AT&T vice president of Consumer Product Management.
Now AT&T is searching for a vendor to assemble the equipment. Of course, questions remain, such as how much it will cost to market the service to acquire a
customer. What happens to that $750 when a customer churns? Can the service really deliver what it promises? AT&T hasn't said exactly what it will charge the
customer for the equipment and installation, although it promises the service will be at least 30 percent cheaper than some current offerings.
The answers to some of those questions may come before AT&T launches its wireless IPO. As for Angel, it looks as though the service that some thought would
never see the light of a commercial day is ready for the sales crew. Wall Street seems to like it. “To me, it sounds like a pretty powerful proposition,” says Lehman
Brothers analyst John Bensche, whose firm has a “buy” recommendation on AT&T's stock right now and an $80 per share price target. AT&T's Zeglis says: “This
is a feast of opportunity.”
As soon as AT&T's tracking stock wins approval early next year, more investors may be able to count their blessings with fatter wallets from the Angel. |
