MEDIA WATCH: Media focuses on murky past as AT&T looks ahead

AT&T is dollars 61 billion in debt, following its transformation into the nation's largest cable company. Its stock is near its lowest level in 11 years, with dollars 105 billion in share value erased since the beginning of the year alone (The New York Times, October 26).

AT&T is dollars 61 billion in debt, following its transformation into the nation's largest cable company. Its stock is near its lowest level in 11 years, with dollars 105 billion in share value erased since the beginning of the year alone (The New York Times, October 26).

AT&T is dollars 61 billion in debt, following its transformation into the nation's largest cable company. Its stock is near its lowest level in 11 years, with dollars 105 billion in share value erased since the beginning of the year alone (The New York Times, October 26).

At the same time, its core long distance business is increasingly seen as 'a dying industry' (Chicago Tribune, October 25), with profits shrinking quickly. AT&T's solution was to announce that it would split itself into four separate businesses.

In making his case, chairman and CEO Michael Armstrong argued that the four business units, as independent companies, would be more flexible and competitive. He also suggested that the four units would be worth more separately. On CNBC (October 25), Armstrong explained, 'The underlying purpose of this move is to take the foundation that we have built and take it to the next stage by enabling these businesses to realize their potential in the market as standalone AT&T companies.'

But CARMA analyzed the ensuing media coverage and found that AT&T's message was lost amid continuing criticism of the company. Various criticisms of the breakup appeared in the media more often than the reasons for the change of strategy. The media described the move as a sharp reversal in AT&T's plan to deliver bundled telecommunications services (local, long distance and wireless phone services, high-speed Internet access and cable TV) on a single bill. The Los Angeles Times (October 26) described the break-up as a 'dramatic signal that AT&T's three-year effort to remake itself into a one-stop telecommunications marketplace has failed.' Armstrong's heated denials of that view earned much less attention.

Coverage also noted that Wall Street did not favor the plan. Amid reports that the company's stock was down and that AT&T had been downgraded by analysts, The Wall Street Journal (October 26) quoted an analyst as saying, 'It's really the end of an icon and no matter how they try to put a positive spin on it, it's the death of a corporate giant.'

News of the breakup prompted assessments of why AT&T found itself in such dire straits. Several publications cited failure to execute its vision as the reason AT&T was floundering. An analyst told Investor's Business Daily (October 25), 'If AT&T was (sic) performing up to its original forecasts ... its stock would be a lot higher and talk about restructuring wouldn't exist.' Others suggested that the break-up was just designed to raise stock prices, while not addressing performance issues.

There were also suggestions that less than expected quarterly profit margins for AT&T's long distance unit overshadowed its breakup announcement.

'It's vaporizing much quicker than most of us had anticipated,' noted one analyst (The Miami Herald, October 26).

The media coverage suggests AT&T will have to prove the merit of its decision to a skeptical public. Analysts are already noting the irreversible nature of the course AT&T has set: 'This is a shattering of one of the idols of 20th century US business, and it's gone, it will never be put back together' (The Record, October 25).



- Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.



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