AT&T unveils business split

AT&T, the telecommunications giant, yesterday announced radical plans to split its operations into three separate quoted companies and sell off its finance arm.

It is the biggest change since the giant corporation was broken up by the courts in 1984, creating the 12 "Baby Bell" regional telephone companies and leaving AT&T with the lucrative long-distance market.

The move, aimed at refocusing the sprawling communications services, equipment and computing divisions, is aimed at enhancing the company's share price, which has suffered on poor results from its expensive foray into computers.

Robert Allen, chairman and chief executive, said that the 1984 divestiture had been thrust upon them, but this restructuring was "on our own initiative, a step that anticipates the direction of our industry.

"We now see this restructuring as the next logical turn in AT&T's journey since divestiture... which will make our businesses more valuable to our shareholders."

Wall Street analysts broadly applauded the news, which sent shares up $61/8 to $63.75 in morning trading. The announcement also helped lift the shares of other large companies in New York.

Analysts said the move might create additional competitive pressures for other global telephone companies, such as BT and Deutsche Telekom. The three smaller, more focused successor corporations will be able to move more quickly in global communications markets, analysts predicted.

The corporate remodelling is not expected to create an onerous tax bill, and is scheduled to be completed by the end of 1996. All shareholders will receive shares in the new entities.The proceeds from the 15-per- cent flotation of the equipment business, along with the sale of the finance arm, will be used to reduce corporate debt.

Spinning off the computing division, Global Information Solutions, will be expensive, according to the company's own estimates. A restructuring charge of $1.5bn will be made against third-quarter earnings, and as many as 8,500 jobs will be cut. A company spokesman refused to rule out additional job losses. AT&T currently employes 300,000 worldwide.

Lars Nyberg, named as GIS chairman in June, will oversee the division's restructuring. "He is the right leader to get our computer business back on track," Mr Allen said. GIS is to halt production of computers, which had run up big losses, but will continue to supply hardware accessories and software.

AT&T's equipment division, which includes consumer products, network systems and the renowned Bell Laboratories, may be brought to the market early, through an initial public offering of up to 15 per cent of the shares in the first half of 1996. The businesses had revenues of about $20bn last year.

Communications services, which includes the consulting and systems integration arm, as well as its Universal Card service and the mobile network - formerly McCaw Cellular - will retain the AT&T name, and Mr Allen will be chairman and chief executive. With revenues last year of $49bn it will still dwarf most communications companies worldwide.

AT&T Capital Corporation, which had revenues last year of $1.4bn, will be sold off to the public or to another company. A 20-per-cent stake was floated two years ago.

AT&T is still expected to push for links with entertainment companies, despite the restructuring. It is involved in video-on-demand trials in the US and has had talks with several large media groups, including, at one point, Disney.