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THE CUTTING EDGE: FOCUS ON TECHNOLOGY | TECH Q&A

AT&T Calls on Investors to See Long-Term Value

Telecom: President says strong voice, mobile Internet and fixed wireless services will bring in revenue and bolster stock price.

September 11, 2000|ELIZABETH DOUGLASS | TIMES STAFF WRITER

AT&T Corp. is in big trouble. Its stock price has slumped to uncomfortable lows, its core long-distance business is shrinking fast and its ambitious new cable initiatives aren't yet picking up the slack.

Now there's talk the company may radically alter its operations by selling or spinning off its flagship long-distance unit, selling off its wireless business, or by breaking the company into pieces.

Despite it all, John Zeglis, AT&T's president and the chairman and chief executive of the company's high-profile wireless business, says he's not panicked in the slightest. In a recent interview, Zeglis talked about AT&T's future, its challenges and where wireless is headed. Through a spokesman, he declined to comment on speculation last week about a possible deal with rival Nextel Communications.

Question: How would you assess where AT&T's stock price is now?

Answer: I think the market gets a lot of things wrong in the short run. There's always a lot going on. But I tell you, the market always gets it right in the long run. What can you say about short-term market shifts other than when the growth shows up, and it will, this is a high-value company.

When you get on the right technology path and grow your company, you get value realized and respected and that's where AT&T is. We are part of it in wireless, from stationary to mobile communications, and we're going from narrowband to broadband. God knows AT&T is an aggressive investor in exactly the right places with broadband. We're going from [old style] circuit switches to [networks that send voice and data in] packets, and we've got a lot of investments going to the right places there for AT&T. Credit Mike [Armstrong, AT&T's chairman] on this one. He saw where high-growth communications were going and went about investing in those areas, from wireless to consumer broadband to business broadband.

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Q: Right now, it seems like Wall Street hasn't bought the long-term strategy?

A: Well, we're getting good execution, and we're just going to keep explaining the successes of the quarterly execution, as well as the obvious rightness of the long-term growth paths here. Broadband is hitting on all of its cylinders and its targets. Wireless continues that wonderfully strong revenue growth. We're adding a lot of cash-flow growth in addition to the revenue growth.

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Q: What's happening with the consumer long-distance business, the company's bread-and-butter money maker?

A: There's no question that long-distance stand-alone service to residences is not a growing business. The future is not going to be just stand-alone long-distance. Yet, as a company asset, it is giving us wonderful cash flow and the base to [sell] additional bundled [services] to our 60 [million] or 70 million long-distance customers.

We are heavily invested in establishing those first-mile physical connections [to homes] ourselves, whether they are wired [through AT&T's cable lines] or wireless [through its new "fixed wireless" technology]. When we get those connections, we get the opportunity to take to our customers bundles of products that include the local phone service, but also the local high-speed data, and all the long-distance behind that, and on to the rest of the world.

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Q: Let's move on to wireless, the day-to-day focus of your job. Why didn't AT&T discuss or disclose the worsening earnings and the reduced forecast at the company before the initial public offering for the wireless business, which was becoming a tracking stock? That caused a stir because the disappointing financials were not revealed until after the wireless stock sale, and both stock prices fell sharply on the news.

A: That information was on the standard earnings call. If you've ever been in one of those situations where you're still working the data, finding the true facts right up until your auditors say "those are certified." You don't go out and "whisper" numbers to Wall Street when you have the AT&T [securities] requirements and integrity in its reporting.

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Q: So you're saying you couldn't have mentioned the bad earnings news any sooner?

A: It was out at the right time in terms of when AT&T knew what it was dealing with and could speak confidently to its investors. We were happy to get the deal done. That $10 billion is very important to our expansion. It is one heck of a vote of confidence in AWE [AT&T Wireless] that investors came in to an oversubscribed book . . . we had a lot more shares ordered than we had to sell. And we finished up the nation's largest IPO in a volatile, even difficult, market. Now we're going to grow the company, grow the revenue, and grow the [operating profit] as well, in as many different directions as we're able to. We've got our core voice business, our mobile Internet, our fixed wireless and our overseas expansion.

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