CHICAGO – AT&T Corp. Monday split off its wireless unit, AT&T Wireless Group Inc. , into a separate, independent company, marking a major step in the telephone and cable giant's restructuring.
New York-based AT&T said it is converting all AT&T Wireless tracking stock into AT&T Wireless common stock and distributing 1.14 billion shares of AT&T Wireless common stock, currently held by AT&T, to AT&T common stockholders of record on June 22.
The distribution is made on the basis of 0.3218 share of AT&T Wireless for each AT&T share outstanding. AT&T common stockholders will receive whole shares of AT&T Wireless and cash payments for fractional shares.
AT&T Wireless tracking stock is being exchanged for AT&T Wireless common stock on a 1-for-1 basis.
The formal separation of Redmond, Washington-based AT&T Wireless is part of AT&T Corp.'s larger plan to split its four major businesses -- wireless, consumer, business and broadband -- into separately traded companies.
AT&T Wireless is the first to be separated, with the other businesses expected to be split off over the next 18 months.
John Zeglis, chairman and chief executive of AT&T Wireless, told Reuters that the company would not be making major strategic changes as a result of the spin off and would continue with its current strategy to upgrade its networks.
"In one sense everything changes. That is to say we are independent and we are able to move faster than ever before to serve the customers and respond to the marketplace," he said. "On the other hand, the strategies that have given us the big growth ... are in place and won't undergo major change," he added.
Zeglis said AT&T Wireless still plans to upgrade 40 percent of its network to a new 2.5 generation system this year. The remaining 60 percent will be upgraded next year.
So-called 2.5 generation wireless networks are considered the first step toward a third-generation network, which promises always-on high-speed Internet access, high quality audio and picture-perfect video. Current systems -- a mix of analog and digital networks -- are considered second generation networks, while analog networks are called first generation.
Seattle will be the first market to have 2.5 generation service this summer, followed by other markets in the fall, Zeglis said.
Following the 2.5 generation upgrade, the company plans to deploy 3G technology -- the global standard known as UMTS, and the most-widely accepted next generation technology.
AT&T Wireless had 15.7 million subscribers at the end of the first quarter, with revenues rising 46.2 percent to $3.21 billion from $2.20 billion in the same quarter a year ago. Cash flow, excluding other income, rose 81.3 percent to $717 million compared with a year ago.
Following the spin off of AT&T Wireless, about 55 percent to 65 percent of the wireless common stock will be owned by AT&T shareholders. About 15 percent of AT&T Wireless tracking shares were sold to new investors as part of a public offering in April 2000 and another 16 percent of shares were sold to Japanese wireless operator NTT DoCoMo Inc. in January 2001.
AT&T holds about 7 percent of AT&T Wireless common stock which the company intends to use to pay down debt.
Faced with falling long-distance calling prices and increased competition, AT&T has been trying to shift away from its traditional voice telephone business to focus on faster-growing wireless, cable television and Internet services. It feels these businesses will be better able to flourish as separate entities.
AT&T said in a news release that its restructuring plan remains on track.
In separate news, Comcast , the No. 3 U.S. cable-television company made an unsolicited $44.5 billion stock bid on Sunday to acquire AT&T Corp.'s broadband cable television unit, but AT&T has said it had no plans to sell that operation.
Since AT&T announced its break-up plan last fall, market speculation has swirled that its components would be acquired. Along with the broadband unit, AT&T Wireless was seen as the most likely takeover targets.
Shares of AT&T Wireless were trading at $16.46 in afternoon trade, off 64 cents from Friday's close on the New York Stock Exchange. Shares of AT&T rose $1.83 at $18.55.