It was all coal-filled stockings at AT&T over the holidays as the company and its shareholders were buffeted by repeated rounds of bad news, including yet another gloomy financial forecast, a rebuke from the FCC and a 83% reduction in the sacred dividend.
The telephone company revised it expectations for the fourth quarter ended Dec. 31, saying that revenue growth would only total 2.5%-3%, down from the company's already-meager expectation of 4%-5% growth. For now the problem is not at the company's cable unit, where cash flow has been sinking for two years but revenues growth is expected to total 11% for the quarter.
AT&T got rapped by the FCC over its failure to fully comply with the consent decree that permitted the telco to buy MediaOne Group in September. To comply with limits on ownership of cable systems, AT&T had to divest either its 26% stake in Time Warner Entertainment or AT&T tracking stock subsidiary Liberty Media Corp., which holds a stake in TWE parent Time Warner Inc. AT&T has said it plans to spin off Liberty, but only if it gets a favorable tax ruling.
The FCC countered that it wanted a firm decision and ordered AT&T to sell the TWE stake, which could prompt a fire sale that would depress the price.
The more immediate snag is at the company's business-services unit, where revenue is pretty much flat for the quarter, worse than expected. Too bad. The business services unit was supposed to be a growth center offsetting revenue weakness in the hotly competitive, deteriorating consumer long-distance sector.