AT&T: MediaOne buy to cut profits 9%
By Bloomberg News
Special to CNET News.com
May 19, 1999, 10:15 a.m. PT
AT&T, the largest U.S. phone company, expects its MediaOne Group acquisition to cut profit about half as much as previous estimates because of lower borrowing costs and a $5 billion investment from Microsoft.
AT&T expects the purchase to reduce earnings next year by about 9 percent, or 15 cents to 16 cents a share. The company expects to earn $2.11 to $2.15 a share before the MediaOne dilution, said Daniel Somers, the company's chief financial officer.
AT&T agreed to buy MediaOne, the No. 4 U.S. cable TV provider, earlier this month for about $62.5 billion, in a move to become the largest U.S. cable-TV provider. At the time, AT&T said the purchase could reduce 2000 earnings as much as 30 cents a share.
Somers said the dilution is expected to be less because it won't have to borrow as much money as quickly as it thought to help finance the purchase. Earlier this month, Microsoft agreed to invest $5 billion in AT&T and announced a series of agreements with the phone giant in a move to boost its position in Internet services.
Separately, AT&T reiterated that it will cut as many as 2,500 workers who help maintain its phone and cable networks as part of a plan to reduce costs by $2 billion by the end of next year. The plan was first disclosed last month by the union that represents the works.
At the company's annual meeting of shareholders in Houston, chairman and chief executive C. Michael Armstrong said the company doesn't plan any further job cuts.
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