Filed by AT&T Corp.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934
Subject Company: AT&T Corp.
Commission File No. 1-1105
October 25, 2000
PRESS RELEASE ISSUED ON OCTOBER 25, 2000
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FOR RELEASE WEDNESDAY, OCTOBER 25, 2000
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AT&T TO CREATE FAMILY OF FOUR NEW COMPANIES
COMPANY TO OFFER TO EXCHANGE AT&T COMMON STOCK
FOR AT&T WIRELESS STOCK
AT&T WIRELESS TO BECOME INDEPENDENT COMPANY
CONSUMER, BUSINESS AND BROADBAND UNITS
TO BECOME PUBLIC COMPANIES
AT&T BOARD TO REVIEW DIVIDEND POLICY
NEW YORK -- AT&T today announced plans to create a family of four new companies,
each operating under the "AT&T" brand, committed to uniform standards of quality
and continuing to bundle each other's services through inter-company agreements.
Under the company's restructuring plan, which it expects to complete in
2002, each of its major units will become a publicly-held company, trading as a
common stock or a tracking stock. AT&T shareowners ultimately would own stock in
four businesses, each a leader in its industry.
AT&T Wireless is one of the fastest-growing wireless companies in the
United States. AT&T Broadband is the largest cable TV and broadband services
company. AT&T Business is the leading enterprise communications and networking
company. And AT&T Consumer is the premiere consumer communications and marketing
company.
Upon completion of the company's plan, AT&T Wireless and AT&T Broadband
will be represented by independent, asset-based common stocks. AT&T Consumer
will be represented by a tracking stock of AT&T. AT&T's principal unit will be
AT&T Business. Each of the four companies will be individually accountable to
customers, investors, employees and other constituencies who will be able to
evaluate their performance against comparable companies.
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"This is a pivotal event in the transformation of AT&T we began three
years ago," said AT&T Chairman and CEO C. Michael Armstrong. "It creates a
family of four national service providers that will be even better equipped to
bring American families and businesses a new generation of broadband
communications and information services.
"We're combining the power of a common vision with the focus and
flexibility of separate companies," said Armstrong. "Each of these new companies
will move faster in meeting customer needs, but they'll serve them under one of
the world's most recognized and respected brands and they'll still be able to
offer bundled services through inter-company agreements. Their employees will
have better career opportunities and be even more highly motivated because
they'll be working for industry-leading companies that don't have to compete
internally for capital or attention. Shareowners should get the full value of
their investment because investors will be better able to evaluate the financial
performance of each AT&T company and compare it to its competitors."
Armstrong stressed that the new companies will continue to collaborate.
AT&T Business, for example, will continue to bundle the Wireless company's
services into its offers for business customers. AT&T Business will continue to
use AT&T Broadband's cable systems in serving some customers. The Wireless,
Broadband and Consumer companies will purchase network services from AT&T
Business under competitive, long-term commercial contracts.
AT&T's Board of Directors unanimously approved the plan in a series of
meetings through the first half of the week. Next, the Board will establish a
capital structure and dividend policy appropriate to each of the new companies.
Among the factors the Board will consider are each company's financial
performance, the dividend policies and capital structures of comparable
companies, and each company's on-going capital needs. AT&T Consumer, for
example, is expected to allocate a greater portion of its earnings to dividends,
while the other businesses can create greater shareowner value by reinvesting
more of their profits.
The Board plans to complete its review of dividend policies before the end
of the year. However, the company expects that the four new companies' combined
dividend will be substantially less than AT&T's current dividend. Anticipating
that framework, the Board intends to adopt a corresponding dividend policy for
AT&T beginning in the fourth quarter of 2000.
Restructuring Plan
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In the first phase of its restructuring plan, the company intends to offer
AT&T shareowners the opportunity to exchange their AT&T Common Stock for AT&T
Wireless tracking stock at approximate market prices. About fifteen percent of
the economic interest in AWE is already in public hands. The company said it
plans to offer AT&T shareowners the opportunity to exchange at least $10 billion
of its economic interest in AWE for their AT&T shares, subject to market and
other conditions.
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AT&T will file its exchange proposal with the Securities and Exchange
Commission in the fourth quarter of 2000 and expects to implement the plan as
soon as possible afterwards. Following the exchange offer and any additional
sale, adjustment or other disposition, the company plans to distribute its
remaining interest in AT&T Wireless to AT&T shareowners later in 2001. Both the
distribution and the exchange offer are expected to be tax-free to U.S.
shareowners.
The company also said that it would seek any necessary tax, regulatory and
other approvals to convert the AWE tracking stock into an asset-based AT&T
Wireless common stock and to distribute it to shareowners. As a separate
company, AT&T Wireless will be better able to raise capital on its own, attract
and retain employees and use its stock as a currency in acquiring, partnering or
engaging in other transactions with other companies. AT&T expects AT&T Wireless
to be an independent, publicly-held company in the summer of 2001.
Further, AT&T plans to create a new consumer communications and marketing
company around its existing residential long distance and WorldNet Internet
access businesses. AT&T said it would create a new class of stock to track the
Consumer company's performance. It currently plans to distribute 100 percent of
the tracking stock to AT&T shareowners in the third quarter of 2001.
As a separate company, AT&T Consumer plans to explore new growth
opportunities. For example, it could use a portion of its cash flow to invest in
technologies, such as Digital Subscriber Loops (DSL), to provide "any distance"
broadband communications and Internet services.
AT&T also announced that, depending on market conditions, it plans to
conduct an initial public offering (IPO) for stock that will track the
performance of its Broadband unit during the summer of 2001. AT&T Broadband is
the country's leading provider of broadband services, including multi-channel
video, pay-TV, high-speed Internet access, and communications. It will assume
AT&T's ownership interest in Excite@Home in connection with its public offering.
Excite@Home is the country's leading provider of high-speed Internet access
service.
The company plans to recapitalize the Broadband tracking stock to an
asset-based common stock within 12 months of the IPO. It will then
simultaneously separate the rest of the company from its Broadband unit,
creating two independent, publicly-traded companies.
When all four companies have been established, AT&T's principal unit
will be AT&T Business, which provides enterprise communications and networking.
The company will trade on the New York Stock Exchange under the familiar "T"
symbol. It will also be the legal owner of the AT&T brand, which it will license
to the other companies. It will be the parent company of the AT&T Consumer
business and will be the issuer of the AT&T Consumer tracking stock. AT&T will
include the AT&T Network and AT&T Labs, which will serve other AT&T-branded
companies as well as other companies under commercial contracts. AT&T will also
continue to hold a 50 percent interest in Concert, its international
communications services joint venture with BT.
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All four companies will generally have exclusive licenses to use the
"AT&T" brand within their respective markets and, under the terms of the
license, they will commit to pre-determined service quality standards and
conform to common customer relationship policies on such issues as privacy.
Four AT&T Companies
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Armstrong said the company's plan will not only give greater visibility to
the market value of each of AT&T's individual businesses but will free them to
be more responsive to their specific markets and move more quickly to seize
growth opportunities. Establishing AT&T Wireless as an asset-based stock
company, for example, will enable it to raise more capital than it could as part
of AT&T and give it greater strategic flexibility.
"We transformed a patchwork of local analog cellular systems into a
nationwide digital service that redefined the wireless industry," Armstrong
said. "Since established as a tracking stock, AT&T Wireless has exceeded every
performance target, with record operating results in the last two quarters. They
had revenue of $9.6 billion over the last 12 months. Now they'll be able to move
as quickly as they need to in an industry that is exploding with opportunity."
The consumer services company, to be known as AT&T Consumer, posted over
$19 billion in revenue over the last 12 months and had earnings before interest,
taxes, depreciation and amortization (EBITDA) of more than $8 billion. It is the
leading provider of pre-paid calling cards with distribution through more than
60,000 retail outlets. AT&T Consumer entered the local service market in Texas
and New York and already has 950,000 "any distance" customers. Its WorldNet
service is one of the leading providers of residential dial-up Internet access
with over 1.3 million subscribers.
As a tracking stock, AT&T Consumer will be able to use its cash flow in
growing these businesses and investing in new initiatives. The new company will
have an exclusive license to use the "AT&T" brand for standalone residential
long distance and dial-up Internet access service.
"Our consumer unit has about 60 million long distance customers," said
Armstrong. "As a separate company, they will be able to build on those
relationships in ways that would have been difficult or redundant within the
current AT&T structure. They will set their own priorities and be able to use
more of the capital they generate to fund them."
Armstrong said that the restructuring plan will allow AT&T management to
give increased operational focus to its Business and Broadband units. AT&T
Business' data and IP revenue grew more than 20 percent in the third quarter,
but voice long distance revenue continued to decline industry-wide at a faster
rate than previously estimated. Overall, AT&T Business generated more than $28
billion in revenue over the last 12 months. AT&T Broadband produced revenue of
$9.3 billion in the same period. It continues to meet aggressive targets for
installing new cable services, with a revenue increase of nearly 11 percent in
the third quarter, and is expected to hit its full stride in 2001.
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"Over the past year and a half," Armstrong said, "we transformed a
collection of scattered cable TV systems into a tightly clustered,
technologically advanced broadband services platform, delivering AT&T-branded
video, voice and data services to millions of American families. Similarly,
three years ago, our business long distance division sold primarily voice
services over a circuit-switched network. Today, nearly a third of their revenue
is in data and IP services. And they've signed more than $12 billion in
outsourcing and network management contracts with some of the most sophisticated
companies in the world."
The company hopes to complete all transactions in 2002, following any
requisite shareowner votes in 2001 and necessary regulatory reviews and tax
rulings.
Armstrong, 62, continues as AT&T's Chairman and CEO. He said that the
company's Board of Directors would name CEO's for the new AT&T Consumer, AT&T
Broadband and AT&T Business companies at the appropriate time. Robert M.
Aquilina, 45, and Howard E. McNally, 47, are currently co-presidents of AT&T's
Consumer Services unit. Daniel E. Somers, 51, is president of its Broadband
unit; and Richard R. Roscitt, 48, president of its Business Services unit.
John D. Zeglis, 53, will remain Chairman and CEO of AT&T Wireless; Mohan
Gyani, 48, will remain as President and Chief Operating Officer.
AT&T, which currently has about 160,000 employees, said that it does not
expect significant downsizing to result from its plans although it reiterated
that each company will continue to size its operations to be as competitive as
possible. Any employees whose jobs are eliminated will have access to job
opportunities across all of the new AT&T companies, as well as a full range of
assistance including job counseling.
AT&T recognizes the importance of its relationship with debt investors.
The proceeds from the repayment of inter-company obligations due to AT&T by AT&T
Wireless, as well as funds from the AT&T Broadband tracking stock initial public
offering, will be used to retire short-term debt. The company will reapportion
its remaining debt, in a manner to be determined, between AT&T Business
(including the AT&T Consumer tracking stock) and AT&T Broadband. The company
currently expects that existing TCI and MediaOne debt will remain with AT&T
Broadband; AT&T's term debt, with AT&T Business. Meanwhile, AT&T intends to
increase its credit facility by approximately $15 billion. AT&T will work with
the credit rating agencies to obtain strong ratings for the new companies.
Financial details of transactions will be released, in accordance with
securities regulations, as they become available. All of these transactions are
expected to be tax-free to U.S. shareowners.
Certain aspects of the transactions will require regulatory and other
approvals and other aspects will be subject to market conditions or other
financial considerations. While AT&T is confident of its ability to resolve any
issues that arise, there can be no guarantee that the restructuring plan will be
implemented or that changes in the plan will not be made.
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The investment banking firms of Credit Suisse First Boston and Goldman,
Sachs & Co., as well as the law firm of Wachtell Lipton Rosen & Katz, are
serving as advisors to AT&T. Salomon Smith Barney is a co-advisor to AT&T in
connection with AT&T Consumer. Merrill Lynch & Company is advising AT&T in
connection with certain AT&T Wireless matters.
The foregoing are "forward-looking statements" which are based on
management's beliefs as well as on a number of assumptions concerning future
events made by and information currently available to management. Readers are
cautioned not to put undue reliance on such forward-looking statements, which
are not a guarantee of performance and are subject to a number of uncertainties
and other factors, many of which are outside AT&T's control, that could cause
actual results to differ materially from such statements. For a more detailed
description of the factors that could cause such a difference, please see AT&T's
filings with the Securities and Exchange Commission. AT&T disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. This
information is presented solely to provide additional information to further
understand the results of AT&T.
In connection with these transactions, AT&T will be filing proxy
statements, tender offer statements and other materials with the Securities and
Exchange Commission. Security holders are urged to read these materials when
they become available because they will contain important information. Investors
and security holders may obtain a free copy of these materials when they become
available as well as other materials filed with the Securities and Exchange
Commission concerning AT&T at the Securities and Exchange Commission's website
at http://www.sec.gov. In addition, these materials and other documents may be
obtained for free from AT&T by directing a request to AT&T at 295 North Maple
Drive, Basking Ridge, NJ 07920; Attn: Investor Relations.
AT&T and its officers and directors may be deemed to be participants in
the solicitation of proxies from AT&T's shareholders with respect to these
transactions. Information regarding such officers and directors is included in
AT&T's proxy statement for its 2000 annual meeting of stockholders filed with
the Securities and Exchange Commission on March 27, 2000. This document is
available free of charge at the SEC's internet site or from AT&T as described
above.
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