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AT&T cable operations going south

Cash flow at AT&T's cable operations continued to sink as new product rollouts and staffing continued to depress earnings.

For the three months ended December, AT&T Broadband's revenues increased a strong 12% to $2.5 billion, including new revenues from the advanced services being rolled out. But the cost of launching new telephone and Internet products is chewing up cash flow, which fell 13% during the quarter.

AT&T executives like to divert attention from how weak the cable unit's cash flow has been by emphasizing the core video business, not the costly new products. But even in the tradtional business, AT&T's cash flow dropped 3%, and revenues grew a medicore 7%. Basic customer growth was negligible, just 0.4%.

"This is an area where we need to do better and will do better," said AT&T Chairman Mike Armstrong.

Revenue per subscriber grew a strong 11% to $52, because of gains in new services. The company's cable telephone business hit company goals by reaching 560,000 subscribers. AT&T contented itself that telephone penetration has topped 16% in some areas.

After a weak 3rd quarter, AT&T Broadband did better with high-speed Internet services, hitting 1.15 million subs, up from 888,000 at the end of September. Digital cable hit 2.9 million customers, with Armstrong bragging that penetration has topped 20% in 25 of its systems. - John Higgins