AT&T Broadband keeps underperforming


Takeover bait AT&T Broadband did improve its cash flow
margins during the second quarter but continued to
badly lag the performance of other cable operators.

For the three months ended June, AT&T Broadband's margin totalled 19.5%. That's up from a startlingly low 16% during the first quarter. But it's down from 21% posted during the same period a year earlier and far lower than the 40-45% other cable operators commonly generate.

Comcast, which is trying to "bear hug" AT&T into selling the cable unit for $58 billion, points to AT&T Broadband's terrible cash flow in trying to convince AT&T shareholders Comcast can make them a lot more money than A&T management can. The 19% margin includes restructuring charges that AT&T contends should be excluded when looking at the company. AT&T prefers to characterize the cable unit's margin as 23.4%, an improvement over last year. That's still around half what Comcast manages to coax out of its properties.

Nevertheless, AT&T Chairman Mike Armstrong, said that
"Broadband delivered on strong greotwh and strong
margin improvement." Still, AT&T showed some gains
during the quarter. Revenue increased 14% to $2.6
billion and new products means that revenue per basic
subscriber has broken $55, a huge number.

Armstrong said that's in part why AT&T rejected Comcast's initial offer. "Comcast's proposal just did not reflect BB's value," he said.

But there are other problems. The company added only
131,000 high-speed Internet subcribers, way down from the 203,000 added during the March quarter. Digital video adds totalled 274,000, a pace that's 50,000 less than the company added during the first quarter. The pace of cable telephone additions hung in at 148,000, just a bit lower than the 153,000 added during the first quarter. - John M. Higgins