AT&T Broadband will take a $60 million to $65 million earnings hit for
the fourth quarter due to the cost of switching high-speed Internet customers
from Excite@Home Corp. to a new network.
AT&T Broadband CEO Bill Schleyer told investors at the Salomon Smith
Barney conference that the earnings hit does not count an additional $30 million
in capital spending on the switch.
The charge against earnings could depress AT&T Broadband's cash-flow
margins by 3 percentage points.
The unit's margin during the third quarter was 25 percent -- an improvement
for AT&T, but 20 points less than the performance of most other MSOs.
Costs include higher customer-service expenses and credits to customers who
were without service for a few days.
When Excite@Home demanded tens of millions of dollars to keep AT&T
Broadband service alive for just three additional months, the MSO chose to cut
off service for one to five days to switch to a new network.
Cox Communications Inc. and Comcast Corp. paid up because they couldn't have
made the switch that quickly.