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

To: Jim Rokosh who wrote (1687)	10/31/1998 9:54:00 AM
From: Bill McCullen	Read Replies (2) \| Respond to of 4298

Jim, I too have been frustrated by AT&T's lack of movement lately. On the heals of an outstanding earnings report and in the midst of a strong rally across the board it is not a good sign that AT&T is flat to down. There are two reasons I can come up with for the stagnation. 1. Although the earnings report was excellent, AT&T's core residential long distance business was down close to 3% from 1997. I believe this has a lot of analysts concerned even though this tends to be lower margin traffic than business or cellular which are both growing very well. 2. Concern/doubt/uncertainty over what the TCI acquisition will bring. AT&T is paying a ton of money for TCI ($48B) and its not clear what benefits will result. The acquisition will provide AT&T with the opportunity to provide local, residential service but this isn't a very attractive business. AT&T, via their own efforts and the acquisition of TCG, already addresses the truly lucrative business market for local access. The residential market is a money maker only for some high end users (30% of the market). Plus, AT&T/TCI are going to have to spend a ton of money to upgrade TCI's plant which is regarded as the oldest/least advanced in the cable industry. Data services via cable modems holds promise but this too is hard to quantify. Of the two I believe that #2 is the one that is really holding back the stock. If AT&T wasn't going to buy TCI I think we would be looking at a $75 stock right now. I believe they would have been better off making more deals like the one with Time Warner than outright buying TCI. All comments welcome. Bill