Magazine

Table: Did AT&T Push Excite@Home into Bankruptcy?


Some shareholders and bondholders say it did

SHAREHOLDERS CONTEND THAT AT&T...

WAS IN CONTROL

When AT&T (T) acquired Tele-Communications in 1999, it got a controlling stake in Excite@Home (ATHMQ). Later, AT&T execs gained a majority of the seats on the company's board. AT&T was critical in naming George Bell chief

executive in 2000 and picking Patti S. Hart to replace him in 2001.

URGED TO SPLURGE

AT&T urged the startup to spend big to sign up new customers, build out its network, and improve service. AT&T also persuaded Bell to hire Hossein Eslambolchi, an AT&T technical veteran, in January, 2001, to work on Excite@Home's network. Eslambolchi invested heavily in equipment, just as the company was running short of cash--then returned to AT&T.

HELD DOWN REVENUES

Critics say conflicts of interest led AT&T execs on the startup's board to limit its revenues unfairly. When Excite@Home's cash started to dwindle, consultant PricewaterhouseCoopers recommended that the company raise the rates it charged AT&T and other cable companies for its broadband services. The board, with AT&T holding 6 of the 11 director seats, never approved it.

DIDN'T FORCE OTHERS TO PAY

Several cable companies stopped paying Excite@Home for as long as six months in 2000. The $50 million in lost cash was a key reason the company had to file for bankruptcy on Sept. 28. AT&T was current on its bills, but why didn't its execs force the other cable companies to cough up?

TURNED DOWN PLEA

Patti S. Hart asked AT&T CEO C. Michael Armstrong for more cash in August, and he turned her down. Experts say it would have cost AT&T as little as $100 million to have helped the company survive through 2002.

AT&T REPLIES...

WAS IN CONTROL

AT&T says its control helped Excite@Home. When Cox and Comcast sat on its board, the upstart was pulled in too many directions.

URGED TO SPLURGE

AT&T defends Eslambolchi's actions, saying he provided invaluable advice that helped correct Excite@Home's quality problems. AT&T also picked up the salaries of Eslambolchi and his assistants.

HELD DOWN REVENUES

AT&T argues that raising rates might have driven away Excite@Home's existing customers, forcing them to look for lower-cost alternatives.

DIDN'T FORCE OTHERS TO PAY

The phone giant says that collecting bills was the job of Excite@Home's execs, not its board members.

TURNED DOWN PLEA

AT&T says injecting more cash was not in the interest of AT&T's shareholders.


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