March 07, 2001, 1:37 PM — AT&T's sale last week of cable and international network assets may bode well for the carrier's bottom line, but analysts say AT&T will have to dump more assets to get back on track.
AT&T announced it was selling cable network assets and off-loading a telecommunications investment in Japan to bring in $4.61 billion. AT&T plans to use these funds to reduce its $61 billion debt, which is threatening the company's credit rating, says Dave Patton, director of consulting at research firm TeleChoice.
If the company's credit rating is lowered, it may become more difficult for AT&T to secure money needed to finance expanded networks supporting new services.
An AT&T spokesman says the cable sales will not negatively affect the company's broadband business service plans. Currently, AT&T Broadband offers cable modem Internet access service to businesses in five markets.
AT&T, which has spent nearly $100 billion on cable networks during the past few years, says the cable assets it is selling off are in markets where it did not have a huge customer base. AT&T has been trying to cluster cable network assets and customers based on geography.
AT&T is selling networks in Georgia, Illinois, Iowa and Missouri to Mediacom Communications for $2.22 billion. In a separate deal, AT&T is unloading cable assets in Alabama, California, Missouri and Nevada to Charter Communications in exchange for cable networks in Florida, $500 million in stock and $1.04 billion in cash.
AT&T is also selling the 10% interest in Japan Telecom it shares with AT&T Wireless to Vodafone for $1.35 billion. That's about twice what AT&T paid for the share in August 1999.
AT&T Wireless was required to sell its 5% interest based on a deal it announced last year with NTT DoCoMo, under which AT&T Wireless customers could benefit. The deal could result in AT&T Wireless expanding its overseas network coverage and developing advanced services.
The sales come at a time when AT&T needs the cash.
"WorldCom and Lucent's credit ratings were recently reduced and AT&T is trying to avoid that," Patton says. "Financial analysts have advised the company to reduce its debt by half."
Observers say AT&T may look to off-load certain international assets. The carrier is in the process of reviewing Concert, its international joint venture with British Telecom. AT&T will not comment on the status of Concert other than to say the company is looking at ways to make the joint venture more profitable. But changes are predicted.
"The joint venture, as it is currently structured, will not last more than 12 months," says Brownlee Thomas, an analyst at Giga Information Group. One theory is that AT&T will take control of Concert by buying an additional 5% of the business, she says.