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Expansion on hold

As a wave of layoffs starts hitting AT&T Broadband, workers aren't the only thing being sacrificed. The cable division is reining in its ambitions in the cable telephone business.

According to suppliers and Wall Street executives, AT&T is largely putting on hold plans to expand its cable telephone operation, a business that served as the rationale for AT&T Chairman Mike Armstrong's $100 billion-plus cable-system shopping spree. AT&T currently offers telephone service on portions of 16 systems. Sources said AT&T has told them that no additional systems will launch telephone services this year. Further, telephone service will not be expanded much in the systems already offering it.

"AT&T does not plan to issue any more cities this year," said Bob Stanzione, CEO and president of ANTEC, a major supplier of cable telephone equipment to AT&T Broadband.

Word of the telephone slowdown came as AT&T Broadband divisions around the country started handing out pink slips to some of its 53,000 employees. The biggest hit seemed to come in the company's Washington state operation, which plans to cut 450 workers, or 4%, during the next two months. Another 175 employees in the division's Englewood, Colo., headquarters are getting the ax, about 9% of the total. An AT&T spokesman said he didn't have companywide layoff figures because the cutbacks are in the hands of each division. But spot checks found 90 workers laid off in AT&T's Atlanta cable operation, 60 in its Denver system, fewer than 100 across its massive California operation, 20 in central Florida, just 10 in Boston and 50 in Chicago.

At the end of December, telephone service was available to about 6.2 million out of the 24 million homes that AT&T systems pass. (The unit has 16 million actual basic cable subscribers.) Last fall, the company had been looking at nearly doubling that, through adding new markets and completing upgrades of existing systems in areas, such as San Francisco and Chicago. "Now I don't think they'll add even a million homes passed," said one telephone analyst.

AT&T Broadband would not detail its cable telephone plans, but Chairman Dan Somers gave some hints recently, telling securities analysts that, after adding 200,000 phone customers in the fourth quarter to hit his goal of 550,000 by year end, the company would probably maintain that pace. "The kind of growth we're sustaining is the kind of growth we've had," he said. "We think this business needs to show margin improvement."