AT&T Corp. announced plans today to issue a new stock to track its fast-growing wireless telephone and Internet holdings and said it will sell some of those shares in an initial public offering next spring to raise capital to build its wireless network.
That announcement was the boldest of several presented at an all-day gathering of hundreds of Wall Street analysts in a Manhattan hotel ballroom. An AT&T official said the company plans to sell between 5 percent and 19 percent of the new wireless shares, raising as much as $20 billion. Analysts said the sale could amount to the largest IPO in history.
Tracking stocks have become a fashionable means of raising capital and highlighting faster-growing segments of companies. AT&T has looked on with some envy at the success of long-distance rival Sprint Corp., which last year issued a tracking stock for its wireless arm, Sprint PCS. Meanwhile, AT&T's stock has stagnated, rising in recent weeks only on rumors that it would do the same.
AT&T plans to spend some of the capital it raises to erect a new "fixed wireless" network, using rooftop antennas to deliver high-speed Internet access and telephone connections to customers not reached by AT&T's cable systems, the company said.
"We intend to spend billions of dollars rolling this out to millions of people," said AT&T chief executive C. Michael Armstrong. He announced that John D. Zeglis, 52, AT&T's president, has been appointed chairman and chief executive of the new entity, AT&T Wireless Group.
The company also named Daniel E. Somers, previously AT&T's chief financial officer, to be president and chief executive of the company's cable and high-speed Internet unit, AT&T Broadband and Internet Services. Somers has held the job on an acting basis since the fall, when Leo J. Hindery Jr. resigned, prompting worries that AT&T's critical cable strategy was foundering. Hindery today was named chief executive of Global Center, the Internet services unit of fast-growing long-distance telephone company Global Crossing Ltd.
Cable sits at the center of AT&T's plans to refashion itself as a leading provider of the full spectrum of high-speed communications service, known as broadband. The company has spent $120 billion amassing the nation's largest collection of cable franchises, with plans to upgrade the wires into swift conduits for voice and computer data.
In a bid to defuse controversy surrounding that effort, AT&T confirmed it has signed an agreement with MindSpring Enterprises Inc., the nation's second-largest Internet service provider, to eventually allow customers to name the provider of their choice when purchasing high-speed access over AT&T cable systems. The two companies today sent a letter to Federal Communications Commission Chairman William E. Kennard outlining the agreement.
But MindSpring also sent Kennard a separate letter saying the FCC should still pursue new rules mandating open access to cable systems "sooner rather than later"-- meaning before an exclusive contract AT&T holds with another Internet provider, Excite At Home, expires in 2002.
"This benefit to consumers should not be delayed," said Dave Baker, MindSpring's vice president for legal and regulatory affairs. The agreement with AT&T "is a big step, a huge step in the right direction," he said. "But it does not eliminate the need for a coherent federal policy."
The FCC has declined to regulate cable Internet service, saying that such rules might discourage cable companies from upgrading their lines. That position does not appear likely to change. In a statement released today, Kennard said "government regulations now would only slow down broadband deployment. . . . I encourage the stakeholders to continue to develop market-driven solutions to serve consumer needs."
AT&T General Counsel James W. Cicconi, who represented AT&T in talks with MindSpring, said today that the two companies had "agreed to disagree" on the timing of the new policy. MindSpring's separate letter does not undermine the significance of the agreement on general principles of open access, Cicconi said.
The talks were held at the FCC chairman's urging. Consumer advocates today assaulted the agreement as "a facade," accusing AT&T and Kennard of trying to end in private a high-stakes debate over who controls access to the Internet.
"Kennard is desperate to show he can work open access out through private means," said Jeffrey Chester, executive director of the Center for Media Education, an advocacy group. "Private agreements don't make good public policy."