AT&T IN THE NEWS *** AT&T WIRELESS HAS HIDDEN ADVANTAGES - [Forbes Magazine,
online, 6/12.] The April offering of a tracking stock for AT&T's wireless
unit was the biggest stock offering in U.S. history. The offering of 360
million shares (15% of the company) raised $10.6 billion. The tracking
stock doesn't look like a winner, but there are 12.5 million reasons not to
sell it short -- namely, the subscribers. Despite spending $3.6 billion
since 1998 to build out its network, AT&T still loses nearly a third of its
customers each year to the competition, estimates Mark Lowenstein of the
Yankee Group. That's about average for the industry. But AT&T can afford
to keep pouring money into the network and it will do so. It will use half
the proceeds of the AWE share sale, and it also has at its disposal $1.1
billion in operating income (net before interest, taxes, depreciation and
extraordinary charges). Apart from trying to make busy signals a rarity,
Chief Technology Officer Roderick Nelson plans to put another $1.5 billion
into a new technology called Edge, which will deliver high-speed data. That
is planned for completion by 2002. Carriers like Bell Atlantic and Sprint
are well positioned to benefit. Their code division multiple access, or
CDMA, technology is more easily adapted for high-speed data. Yet AT&T's
network has some hidden advantages. For starters, its operating costs are
lower than those of its rivals, Nelson says. In addition, while the rivals
try to add mass by targeting soccer moms, AT&T has deliberately focused on
higher-end users like business customers. The result: AT&T's subscribers
generate an average $66 in revenue per head per month, $14 more than the
industry average. Those 12.5 million subscribers become a trump card as the
wireless industry goes global, says Andrew Cole, a VP at Renaissance
Strategy, a global telecom consulting firm. "Carriers will have to compete
on price. To do that they need scale -- tens of millions of customers."
But when it does build out its next-generation network, eventually replacing
TDMA (time division multiple access) with Edge, AT&T's technology will be
compatible with most of the cellular networks outside the U.S. The rival
CDMA networks won't. That could help AT&T tap into a lion's share of the
world's predicted 1.2 billion wireless users by 2005.
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