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AT&T Restates Bad News As Stock Continues to Fall

AT&T Corp. stock continued its downward spiral as the year drew to a close, spurred by its fourth earnings warning in a year and continued softness in the company's business and consumer long-distance telephony units.

After market close on Dec. 20, fourth-quarter overall revenue growth should be 2.5 percent to 3 percent, compared with earlier guidance of 4 percent to 5 percent, the company said. On the bright side, at the AT&T Broadband cable unit revenue growth is expected to be the same or slightly better than the previous quarter-about 10.8 percent.

AT&T's share price plunged on the news, hitting a new 52-week low of $16.50 per share on Dec. 21 before rallying slightly to close at $17.06 that day. In subsequent days, AT&T stock rose as high as $17.81 per share, closing Dec. 27 at $17.06 each.

The stock is down 72 percent from its 52-week high of $61 per share.

The company expects operational earnings per share for the fourth quarter to be in the 26-cent to 28-cent range, compared to the 29 cents to 33 cents that was previously projected.

Operational cash earnings per share will be between 45 cents and 47 cents, compared to the previous forecast of 49 cents to 52 cents, AT&T said.

Saddled with a huge $62 billion debt load, AT&T has been scrambling for strategies to reduce its leverage. In October, the company announced it would split into four separate companies-consumer long distance, business, broadband and wireless.

In conjunction with the earnings restatement, AT&T also said it would slash its quarterly dividend by 83 percent, to 3.75 cents per share. The dividend had been 22 cents per share.

AT&T could save about $3 billion a year through the dividend reduction-about what it pays annually to service its debt.

The reduction was made to bring AT&T's dividend policy in line with its competitors, AT&T chairman C. Michael Armstrong said in a prepared statement.

The company also is making moves to pare down its debt even further-including putting some non-strategic rural systems that represent 1.2 million subscribers up for sale.

As previously reported in Multichannel News, AT&T Broadband is also trying to swap systems with Cox Communications Inc. and Comcast Corp. in exchange for "put" rights to Excite@Home Corp. stock. Those put rights are valued at another $3 billion.