AT & T Broadband: Releases Benchmark Report

Peter Schroeder/Rory Buchalter  (416) 593-5577 ext.279, ext.268 / e-mail: ps@dbrs.com

 

AT&T Broadband is a wholly owned division of AT&T Corp.  AT&T Broadband is currently the largest cable TV service provider in the U.S. serving just under 15 million subscribers (pro forma including recent asset sales of one million subscribers). 

 

The core strengths of this division are as follows:

(1)   Significant economies of scale given its size;

(2)   Significant bundling opportunities, with a leadership position in data and digital television services in the U.S.; and

(3)   Strong brand recognition in “AT&T”

 

Despite these notable strengths AT&T Broadband faces some meaningful challenges; 

(1)   Further network upgrades are still required;

(2)   Cost of acquisition for new services remains high;

(3)   High susceptibility to satellite competition in non-digital areas;

(4)   Further asset swaps and integration of recent asset swaps could lead to high integration risk; and

(5)   With the completion of the spin-off from parent AT&T expected sometime in 2002, AT&T Broadband will have reduced access to capital and will face higher interest rates.

 

However, despite some meaningful challenges, AT&T Broadband is well positioned to grow EBITDA rapidly through the expansion of new product offerings.  Moreover, AT&T Broadband's significant size and recent improvements in network clustering are expected to lead to enhanced operating efficiencies.  As further consolidation in the industry is expected to occur, DBRS expects AT&T Broadband to emerge as one of the dominant cable providers.

 

AT&T Corp. announced that it plans to spin off AT&T Broadband into a tracking stock and public offering during the late summer of 2001, and plans on recapitalizing the tracking stock division into an independent asset-based common stock sometime in 2002.

 

 

Dominion Bond Rating Service Limited (DBRS) has published a full report that provides additional analytical detail.  To see this report, please click on http://www.dbrs.com/web/sentry?COMP=2900&DocId=119120.  If you do not have access to this document, please contact us at info@dbrs.com.