SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: May 2, 2000
AT&T CORP.
A New York Commission File I.R.S. Employer
Corporation No. 1-1105 No. 13-4924710
32 Avenue of the Americas, New York, New York 10013-2412
Telephone Number (212) 387-5400
<PAGE>
Form 8-K
AT&T Corp.
May 2, 2000
Item 5. Other Events.
See Exhibit 99 to this Form 8-K.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 99 AT&T Corp. Press Release issued May 2, 2000.
<PAGE>
Form 8-K
AT&T Corp.
May 2, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AT&T CORP.
/s/ Marilyn J. Wasser
-----------------------------------
By: Marilyn J. Wasser
Vice President and Secretary
May 2, 2000
[GRAPHIC OMITTED]
News Release
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE: TUESDAY, MAY 2, 2000
AT&T Updates Guidance On Financial Results For 2000
NEW YORK -- In a conference call with financial analysts today, AT&T
provided updated guidance regarding its anticipated revenue and earnings for
2000. The update was based on new information regarding the anticipated closing
of the company's merger with the MediaOne Group, a more current view of the
performance of its voice long distance businesses and the expected impact of new
regulatory rules regarding access payments, assuming approval by the Federal
Communications Commission (FCC).
In sum, the company reduced its previous guidance on operational
earnings - including the estimated impact of the recently announced Excite@Home
and Net2Phone transactions - by 9 cents from $1.89 to $1.94 per share to $1.80
to $1.85 per share. The company also said that its pro forma revenue for 2000
would increase approximately 7 to 8 percent, rather than the previously
estimated 8 to 9 percent, due to slower growth in legacy long distance services.
Reductions in the access fees the company pays local phone companies for
handling long distance calls are expected to further reduce pro forma revenue
growth to a range of 6 to 7 percent.
"AT&T is still in the midst of its transformation from a domestic voice
long distance company to a facilities-based provider of broadband services over
any distance," said AT&T Chairman C. Michael Armstrong. "Our growth businesses
are gaining momentum. Our high-speed data and IP services revenue is growing in
the high teens. Our network outsourcing and management unit continues to build
on an $11 billion backlog of contracts. Our wireless services revenue is
outpacing the industry, both overall and on a per-subscriber basis. And our
broadband unit is breaking records in signing up customers for digital video,
high-speed Internet service and cable telephony.
"Our voice long distance businesses have exceptional rates of return
and generate cash flows that we are re-investing for growth," Armstrong said.
"However, consumer long distance is a mature business, characterized by severe
price competition and the loss of customers moving to wireless and Internet
technologies. These forces have accelerated in recent months and will affect our
full-year financial projections. Our goal remains to manage our consumer long
distance business in a way that finds the best balance between those high rates
of return and the rate of revenue decline."
<PAGE>
MediaOne Group Closing
While the company remains confident of regulatory approval for its
planned merger with MediaOne, the closing date will be later than initially
expected, as regulators consider factors raised by other recent industry
transactions. It now appears that the MediaOne merger could close by midyear.
Earlier earnings estimates had assumed a closing at the beginning of the second
quarter.
Excluding the effects of the MediaOne merger, and prior to the impact
of factors described below, the company projects that operational earnings in
the year 2000 would be 60 cents higher than the previous estimate of $2.10 to
$2.15 per share. (See chart on page 5 for a complete description of the impacts
of the MediaOne merger and other factors.)
Consumer and Business Long Distance
Further, AT&T announced that, while growth in data and Internet revenue
is strong, legacy long distance services are declining at a faster rate than
anticipated.
Competition in consumer long distance is accelerating, causing
high-value customers to move to lower-priced calling plans at a more rapid pace.
Consumers are also moving from basic wired long distance to wireless and
Internet services at greater rates. And as a result of its focus on acquiring
and retaining more profitable customers, the company is experiencing market
share loss among customers with lower usage. On the positive side, AT&T is
retaining heavy long distance users and has had a positive net customer and net
revenue exchange with the one Bell company allowed into long distance. Based on
these trends, pro forma revenue in the company's Consumer segment is projected
to decline in the range of 5 to 7 percent, rather than the 3 to 5 percent
previously estimated.
In the business market, customers are increasingly moving from
low-speed private line service, in which AT&T has a leading market share, to
more sophisticated data networks, which are highly competed. AT&T said its
business long distance revenue in 2000 is expected to reflect last year's loss
of a major government contract and a first-half drop in sales to some large
corporations. The company has taken a number of steps to accelerate growth,
including a restructuring of its business sales organization, a new management
team and a stronger product line. Pro forma revenue in the company's Business
segment will increase by about 8 percent due to strong growth in Internet, data
and outsourcing services. The previous estimate was for pro forma business
revenue growth of 9 to 11 percent.
Based on this operational performance in its consumer and business long
distance units, the company's total pro forma revenue is expected to grow in the
range of 7 to 8 percent in 2000 rather than the previous estimate of 8 to 9
percent. The impact of these shortfalls on operational earnings is expected to
be about 13 cents.
Access Reform
The FCC is expected to reduce long distance companies' payments to
local exchange companies for handling calls, effective July 1. This will reduce
the long distance industry's payments to incumbent local exchange carriers by
$3.6 billion in 2000. AT&T plans to flow through its share of these savings to
its customers. The company believes access reform is in customers' and the
industry's interests since it eliminates hidden subsidies currently being paid
to local exchange monopolies and it simplifies the way these charges are billed
to consumers, enabling them to more easily compare competitive offers.
<PAGE>
Assuming approval of these reforms by the FCC, the company altered or
eliminated plans for certain pricing actions and agreed to eliminate the minimum
charge for consumers paying its basic rates. Combined with the reduction in
access charges, which formerly were included in AT&T's rates, this will further
increase the Consumer Services unit's estimated pro forma revenue loss to a
range of 6 to 8 percent and the company's overall estimated operational earnings
will decline by about 7 cents per share.
Revenue and Earnings Guidance
In total, AT&T expects overall revenue for 2000, on a pro forma basis,
to grow in the range of 6 to 7 percent, compared to the 8 to 9 percent
previously projected.
AT&T's operational earnings per share in 2000 are projected to be in
the range of $2.50 to $2.55, excluding the effects of the company's pending
merger with MediaOne and other previously announced transactions.
Assuming the MediaOne closing occurs around midyear, AT&T estimates
dilution for the amortization of goodwill, transactional costs and deferred
synergies associated with the delayed closing would reduce operational earnings
in 2000 by approximately 47 cents per share. When the company's transactions
with Excite@Home and Net2Phone also close later this year, the company projects
that 2000 operational earnings per share will be further reduced by
approximately 23 cents.
Considering all these factors, AT&T projects operational earnings for
2000 in the range of $1.80 to $1.85 per share. Cash earnings, on the same basis,
are projected to be in the range of $2.40 to $2.45 per share. The company said
operational earnings before interest, taxes, depreciation and amortization
(EBITDA) would remain around $24 billion.
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
document also contains certain information such as operational EPS, operational
cash EPS and reported and operational EBIT and EBITDA that are not presented in
accordance with generally accepted accounting principles. This information is
presented solely to provide additional information to further understand the
results of AT&T.
<PAGE>
Earnings Per Share Guidance
- --------------------------------------------------- ----------------------
Operational EPS
- --------------------------------------------------- ----------------------
- --------------------------------------------------- ----------------------
December 6, 1999 guidance (1) (2) $2.10 - 2.15
- --------------------------------------------------- ----------------------
- --------------------------------------------------- ----------------------
Add back estimated MediaOne + $0.60
EPS dilution impact
- --------------------------------------------------- ----------------------
- --------------------------------------------------- ----------------------
Revised AT&T standalone guidance $2.70 - 2.75
- --------------------------------------------------- ----------------------
- --------------------------------------------------- ----------------------
Impact of operational shortfalls - $0.13
- --------------------------------------------------- ----------------------
- --------------------------------------------------- ----------------------
Impact of proposed regulatory changes - $0.07
- --------------------------------------------------- ----------------------
- --------------------------------------------------- ----------------------
Potential dilution from pending transactions
- --------------------------------------------------- ----------------------
- --------------------------------------------------- ----------------------
Excite@Home / Net2Phone - $0.23
- --------------------------------------------------- ----------------------
- --------------------------------------------------- ----------------------
MediaOne (3) - $0.47
- --------------------------------------------------- ----------------------
- --------------------------------------------------- ----------------------
Revised Operational EPS $1.80 - 1.85
- --------------------------------------------------- ----------------------
(1) Assumed an April 1, 2000 closing for MediaOne acquisition
(2) Adjusted dilution associated with Excite@Home transaction of $0.20 and
Net2Phone transaction of $0.01 announced in March 2000, guidance was
revised to $1.89 - $1.94
(3) Assumes midyear closing and impact of goodwill amortization, deferred
synergies from the delay in closing and cost of MediaOne shareholder
collar
<PAGE>
Revenue Guidance
- ------------------------------------------------------- ------------------
Total 2000 Revenue
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Previous guidance, pro forma 8 - 9 %
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Revised for operational shortfall 7 - 8 %
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Revised total 2000 revenue, reflects above plus 6 - 7 %
impact of proposed regulatory changes (pro forma)
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Consumer Services 2000 Revenue
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Previous guidance (3) - (5) %
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Revised for operational shortfall (5) - (7) %
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Revised Consumer Services 2000 revenue, reflects (6) - (8) %
above plus impact of proposed regulatory changes (pro
forma)
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Business Services 2000 Revenue
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Previous guidance 9 - 11 %
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Revised Business Services revenue reflects About 8 %
operational shortfall
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Wireless Services 2000 Revenue
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Previous guidance unchanged 25 - 30 %
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Broadband 2000 Revenue
- ------------------------------------------------------- ------------------
- ------------------------------------------------------- ------------------
Previous guidance unchanged 12 - 14 %
- ------------------------------------------------------- ------------------
Definitions
Operational Cash Earnings: Refers to operational earnings excluding the
amortization of franchise costs, goodwill associated with acquisitions and
equity investments, and other purchased intangibles.
<PAGE>
Operational Earnings: These results exclude certain gains and charges as well as
the impact of AT&T's ownership interests in Cablevision Systems Corp. and Excite
@ Home.
Reported Earnings: The attached income statement reflects Reported Earnings in
accordance with generally accepted accounting principles.
Pro forma Revenue: Revenue is adjusted for the TCI acquisition, adjusted all
closed cable transactions, the IBM Global Network, various divestments of
international businesses, the impact of Concert and proposed regulatory reform.
# # #
