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To: Eric L who wrote (5230)	1/14/2000 8:13:00 PM
From: Ruffian	Respond to of 13582

AT&T Prepares For Wireless Tracker By Monica Alleven AT&T Corp. peeled back some layers of the onion regarding its wireless systems, but not enough to bring the investment community to tears. That's because even before AT&T made a raft of disclosures in an SEC filing for its proposed wireless-tracking stock, analysts already had a pretty good idea that AT&T Wireless Services was losing money on its Digital One Rate plan. The trend-setting plan meant the carrier had to pay high roaming rates when customers were off its network, and AWS had to hustle to upgrade its capacity and add coverage. All that spending left AWS with just $44 million in net income the first nine months of 1999, compared with net income of $246 million for the same period in 1998, according to AT&T's preliminary proxy statement, filed Jan. 7. The 200-plus page proxy, filed ahead of a shareholder vote on the wireless-tracking stock issuance this spring, detailed a slew of not-usually-disclosed financials related to AWS. But none of them were particularly surprising. Net income was in line with analysts' expectations. Besides, many Wall Streeters are more interested in EBITDA (earnings before interest, taxes, depreciation and amortization), and AWS has revealed those figures before. AWS' EBITDA margins last year hovered around 20 percent, whereas cellular competitors without PCS licenses reported record margins as high as 56 percent. While AWS was in the unique position of building out new PCS markets and managing older cellular systems, analysts suspect Digital One Rate had a negative impact on the bottom line, at least in certain markets. Says one analyst speaking on condition of anonymity: "DOR killed their EBITDA margins." Yet scores of analysts remain steadfastly bullish about AWS. Why? Wireless is hot, for starters. For another, AWS is nationwide, and it has demonstrated via Digital One Rate that it can light a fire in the industry, sparking numerous copycat one-rate plans that include long distance and roaming. The carrier already has taken steps to reduce costs associated with Digital One Rate by acquiring more wireless networks, building out its PCS markets and using technology that selects the most economical roaming partner in a given market. With proceeds from a public offering, AWS can further build out its network and acquire, say, a rural carrier such as Western Wireless to fill in more of those off-network areas. Here's how the tracking stock works: AT&T issues a security representing the economic interest in a portion of its businessin this case, mobile voice and data, fixed wireless and international wireless. Then the company will sell a portionabout 20 percentof that business to the public. After a few months, the company will distribute wireless-tracking shares to existing AT&T Corp. shareholders. Investors debate the value of tracking stocks, which limit investors' control and can pose conflict-of-interest issues on the board of directors. But the company believes such a stock will allow AT&T to unleash the value of its high-growth wireless business and attract investors who aren't interested in the "old AT&T." Offering shares to the public also means AWS will have to divulge more specific balance sheet information. As the onion layers come off, investors will be gunning for profits and shedding tears of joy.