| BUSINESSWEEK ONLINE : OCTOBER 18, 1999 ISSUE | ||||||||
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| COVER STORY
AT&T's Six Challenges Armstrong must overcome hurdles to transform the company from a long-distance player into a communications Goliath. BW rates the difficulties the company faces on a scale of one to four phones. LONG DISTANCE AT&T is troubled, and it's going to get worse. Because of a price war with Sprint and MCI WorldCom, AT&T's consumer long distance is projected to shrink about 5% this year, to $22 billion. The decline could accelerate when Bell Atlantic and other Baby Bells enter the market. AT&T's long distance for businesses is growing 6% this year, to $24 billion, although that's likely to slow in the future. Such pressures prompted AT&T to announce plans for $2 billion in cuts. Three Phones WIRELESS This business is red-hot, thanks in large part to AT&T's Digital One Rate, which includes roaming and long distance for a flat fee of 11 cents to 15 cents a minute. The wireless business is projected to surge about 40%, to $7.6 billion, this year. Still, Sprint is adding more subscribers, and it's marketing wireless Web browsing that AT&T can't match. And the wireless joint venture between Bell Atlantic and Vodafone unveiled in September creates a major third competitor with national reach. Three and a half Phones LOCAL PHONE SERVICE This remains a work in progress. AT&T has high hopes of selling local phone service over its cable-TV network, but there have been quality problems in its Fremont (Calif.) test market. AT&T has also announced a deal with Time Warner to offer cable telephony starting in February, but the two have yet to agree to final terms. Still, AT&T says it is on track to be in nine test markets with cable telephony by early 2000. It is selling service commercially in Fremont and Chicago. Two Phones CABLE TELEVISION Armstrong pulled off a coup by cutting a deal to buy MediaOne Group after Comcast appeared to have the company locked up. But he faces hurdles in getting the $62 billion deal closed. The FCC is concerned that AT&T could have too much of the U.S. cable market, and it may force the company to sell some cable properties, including perhaps MediaOne's stake in Time-Warner's cable business. If the deal closes, it will make AT&T the largest cable company in the country. Three Phones INTERNATIONAL After a previous international partnership floundered, AT&T created a joint venture with British Telecommunications last year to deliver services to multinational corporations. The venture has strong prospects. Both sides are chipping in assets that will generate a combined $10 billion in revenues, and they hired former Pacific Bell exec David Dorman to run the venture. If all goes well, this could well lead to an eventual merger between the two telecom giants. Three Phones BROADBAND The cable-TV network has tremendous potential to deliver zippy Internet connections to U.S. homes. Excite@Home, in which AT&T has a majority voting stake, increased its cable-modem subscribers by 35% in the second quarter, to 620,000 people. But a strategic dispute is clouding relations between the two companies. Excite@Home is moving into content, while AT&T would prefer to sell Net connections without content. That way, it could market Net access with Excite rivals. Two Phones DATA: SANFORD C. BERNSTEIN _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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 RELATED ITEMS The Main Event: Bernie vs. Mike COVER IMAGE: Mike vs. Bernie TABLE: Two Titans, Two Gambits What It Will Take to Win TABLE: A Bigger No. 2 TABLE: Bernie's Challenges AT&T: The Problems Keep on Coming CHART: Plenty of Snags Lately TABLE: AT&T's Six Challenges TABLE: Turmoil at the Top Commentary: All These Mergers Are Great, But... ONLINE ORIGINAL: Some Sorry Scores from AT&T's California Testbed ONLINE ORIGINAL: Why These Sprint Shareholders Are Eating Dust INTERACT E-Mail to Business Week Online | |||
