AT&T Corp.'s ambitious plans to sell local and long-distance telephone service plus high-speed Internet access over cable television lines hit a snag yesterday with the announcement that the executive heading the effort, Leo J. Hindery Jr., has abruptly resigned.
AT&T portrayed the news as just the result of Hindery's having completed the project's groundwork. "Leo has accomplished what he came here to do," company spokesman Mark Siegel said.
But analysts read the announcement as a sign of tension within AT&T, as the company seeks to absorb the cable properties it has snapped up around the country, morphing from an old-fashioned phone company into a high-tech leader able to sell the complete array of communications services.
Hindery came to AT&T earlier this year when the company bought Tele-Communications Inc., the largest cable company in the nation. He had been TCI's president. AT&T made him president and chief executive of its cable television unit, AT&T Broadband & Internet Services.
"It raises the question, first, was there a personality conflict? And if so, was it a culture clash between cable companies and phone companies that will be permanent and will hinder the next president?" said Rex G. Mitchell, an analyst with Banc of America Securities. "There's almost no favorable way to look at it."
For AT&T, the news comes at an inopportune moment. Its stock--which closed at $46.62 1/2 yesterday, up $1.62 1/2--has been trading sideways for months amid concerns the company paid too much for its cable properties.
Meanwhile, the company awaits approval of its latest cable purchase, Media One Group Inc. The Federal Communications Commission is to vote tomorrow on drafts of rules governing how many cable lines one company may control--a decision that could determine whether AT&T can absorb Media One without selling other assets.
The stakes are high. Ever since the government broke up the Bell System in 1984, handing the long-distance franchise to AT&T, the firm has been forced to pay local companies to connect to customers. Through cable, AT&T hopes to find a straight path into homes and offices.
"Given the amount of money they're spending, it's pretty clear they view it as one of the core pieces of reconnecting directly with their customer," said Robert B. Wilkes of Brown Brothers Harriman & Co. in New York.
In an interview yesterday, Hindery's acting replacement, Daniel E. Somers, said the departure wouldn't stall the company's plans. "There's a great strong team of people that I'm inheriting," he said. "We are on plan for our build-out."
AT&T has already launched pilot service of its broadband cable service in Dallas, Chicago, Pittsburgh, Denver, Seattle and the San Francisco Bay area, Somers said. It plans a steady expansion, gaining millions of customers by the end of 2001.
Analysts say those goals won't be realized easily. Several cable firms have sought to partner with telephone companies in recent years; each of the ventures has dissolved into acrimony. TCI tried it twice, first with Bell Atlantic Corp., then with Sprint Corp., Cox Communications Inc. and Comcast Corp., before this year folding itself into AT&T.
While AT&T is known as highly bureaucratic and centralized, TCI historically has functioned as a loose confederation of smaller cable franchises run by mavericks.
"The AT&T-TCI marriage was going to be fraught with problems no matter what," said Scott Cleland, an analyst with Legg Mason Precursor Group. "They're like oil and vinegar."
Some suggested Hindery's departure may have been hastened by internal disagreements over how to handle Excite At Home, a firm that provides Internet content over cable lines. Under Hindery's leadership, TCI bought a 40 percent stake in Excite At Home and signed a contract giving the company exclusive rights to reach customers over TCI's wires.
Last week, rumors flew that AT&T was seeking to split Excite At Home and allow other service providers access to their customers once the exclusive contract runs out in 2002. Hindery emphatically denied it, but the next day the company said all options were open once the contract was done.
Hindery did not return phone calls, but a spokesman said his departure was in no way linked to talks about Excite At Home's future.
CAPTION: AT&T says Leo J. Hindery Jr. resigned because his work was done.