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AT&T Wireless Tracking Stock Hits Jackpot

Almost US$11 billion ain't bad for a day's work. AT&T Corp.
Written by Meg McGinity, Contributor

Almost US$11 billion ain't bad for a day's work. AT&T Corp.'s AT&T Wireless Group tracking stock broke records with the largest initial public offering in history late last week. - by Meg McGinity

5 May 2000 - The cash infusion, which comes during a time of financial market schizophrenia, will help the wireless division to evolve to next-generation services and compete in an increasingly crowded wireless marketplace, company officials said.

"We are very pleased [with the initial public offering (IPO)]. In a very volatile market, we've still been able to see a great offering, and a great start," said Mohan Gyani, chief financial officer of AT&T Wireless Group (www.attws.com), which will be headed by John Zeglis, a longtime AT&T vet who has served as Michael Armstrong's No. 2 executive. The 360-million-share offering was priced at US$29.50 per share.

According to Gyani, the division will use US$7 billion of the $10.6 billion raised to increase capacity in its mobile voice services; make the migration to third-generation (3G), data-rich services; and build out its fixed wireless offerings. The remaining $3 billion is earmarked for the mother company.

Gyani said about US$3.5 billion to $3.8 billion will go toward boosting mobile services and networks that support AT&T Wireless' nearly 12 million customers. In total, about $4.1 billion is designated for capital expenditures for network and fixed wireless operations. AT&T Wireless, which generated $7.6 billion in revenue in 1999, experienced some well-publicized network capacity problems in high-usage markets, such as New York, last year.

"We have had service challenges in the past due to the unprecedented demand for Digital OneRate, but in 1998 we spent $1 billion, last year $2.2 billion and this year we'll spend $3.5 billion in the mobility market on capacity," Gyani said.

Pumping data

Gyani also expects AT&T to make the jump from second-generation services — which can deliver data at a snail-like 9.6 kilobits per second — to 3G services, which can pump data at up to 284 Kbps. By the end of 2001, AT&T Wireless should be in full commercial deployment of 3G services, he said.

The timing for AT&T Wireless' cash windfall couldn't be better. Although a risky move due to the market's volatility, the funds arrive just as competition in the marketplace has heated up.

"They are facing tremendous pressure from companies like Verizon [Wireless]," said Elliot Hamilton, executive vice president at Strategis Group. Verizon (www.verizonwireless.com) is the newly named venture between wireless powerhouses Bell Atlantic Mobile , Vodafone AirTouch and PrimeCo.

The IPO also comes as the Federal Communications Commission is planning spectrum auctions to support the much touted 3G services this summer.

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