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Technology Stocks : AT&T -- Ignore unavailable to you. Want to Upgrade?

To: KM who wrote (1478)	6/27/1998 12:51:00 AM
From: Ian@SI	Read Replies (1) \| Respond to of 4298

Some input to your decision... Friday June 26, 6:45 pm Eastern Time AT&T outlines EPS view, costs for TCI deal NEW YORK, June 26 (Reuters) - AT&T Corp. (T - news) said it is comfortable with earnings estimates of $4.60 a share in 2001 and $5.50 a share in 2002 for the combined AT&T and Tele-Communications Inc. (TCOMA - news; LBTYA - news). AT&T on Wednesday agreed to buy cable TV giant TCI for $48 billion, including debt. The agreement includes a break-up fee of $1.75 billion should the deal fall apart, AT&T told analysts on a conference call Friday. AT&T Chairman C. Michael Armstrong told analysts ''I have no buyer's remorse. I think this is a dynamite combination.'' Shares of AT&T have fallen about 13 percent since the TCI deal was announced on concerns of earnings dilution, technology hurdles and potential problems integrating the two massive companies. AT&T and TCI executives hosted the call to ''clear up...some information that is being disseminated and some really very wrong information...It is in our best interest to give you accurate information,'' Armstrong said. AT&T also outlined the revenue enhancements and cost savings its expects from the deal. The company estimated total revenue enhancements will be about $3.4 billion and cost savings will amount to $1 billion, said AT&T chief financial officer Dan Somers. Total EBITDA (earnings before interest, taxes, depreciation and amortization) synergies will be more then $2.2 billion, Somers said. Included in those estimates, the company expects long distance and cable customer churn rates (customer turn-over) to decrease as the combined company begins to offer a package or ''bundle'' of communications and cable services. Customers are less likely to switch long distance carriers if they buying other services as well. AT&T sees long distance customer churn rates dropping about 33 percent, which will add about $200 million a year in revenues, Somers said. AT&T's long distance market share in TCI's territory is expected to grow, adding about $500 million in revenues. Cable penetration will likely grow by about five percent, enhancing revenues by about $500 million as well, Somer said. Increased data and Internet penetration will add about $500 million in revenues. Expanding AT&T's local telephone presence will add about $700 million to revenues in the third year after the deal closes. The core AT&T business, which will focus on corporate customers, will generate about $1 billion in additional wholesale revenues by the third year after the deal closes, AT&T said. AT&T also sees cost savings of about $1 billion as the combined AT&T-TCI spends marketing funds more efficiently, reduces costs to add new customers and other expense reductions. The company does not anticipate any layoffs. AT&T also outlined future revenue growth estimates for the consumer business. The company expects to maintain about two percent annual growth in its consumer long distance business, while other consumer services -- such as data, Internet, wireless -- will see more significant revenue growth. Total future annual revenue growth in the new consumer services business will be about 12 to 14 percent, building on a revenue base of about $33 billion, Somers said. AT&T expects the goodwill associated with the TCI to be less than $750 million. More specific details on goodwill will be determined later, the company said. AT&T and TCI also outline their spending plans. TCI said it planned to spend about $1.8 billion to upgrade its cable networks to make it suitable for voice and data traffic. TCI said it has spent about $400 million to $500 million so far. Due to the merger with AT&T, TCI aims to cut the time needed to complete the upgrade by about 10 to 15 percent. Speeding the process will not add to the total cost, TCI said. AT&T expects its 1998 capital spending to be about $7 billion. Capital spending will total $8 billion if its pending acquisition of Teleport Communications Goup Inc. (TCGI - news) is included. AT&T expects it capital spending requirements to remain fairly steady going forward. The bulk of the capital spending, or about $5 billion, will be devoted to its business networks. About $1 billion will be spent on its wireless system and another $1 billion on systems and other initiatives. The new consumers services business may see some additional capital spending, but that spending would not be funded by the AT&T parent.

To: KM who wrote (1478)	6/27/1998 8:36:00 AM
From: jabbo	Read Replies (1) \| Respond to of 4298

The only support would come only if the stock breaks down enough (low 40's) to force the merger off since TCI shareholders (including Mallone) would loose any benefits from the exchange premium (already down from $50 to $44). The only hope is that Armstrong realizes that the market is signaling his first major mistake and acts accordingly to correct it before major AT&T shareholders (institutional, pension funds, endowments) cry loud enough to drive him out for the blunder.