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Hostetter Buys AT&T Shares At Good Time

AT&T Corp. shares received a desperately needed lift last week, surging 12 percent after an influential analyst raised his rating on the stock.

Morgan Stanley Dean Witter & Co. analyst Simon Flannery upgraded AT&T from "neutral" to "strong buy" last Tuesday, prompting heavy trading in the stock. AT&T finished the day at $22.50, up $2.44 each.

The growth in the shares was good news to its largest individual shareholder, company director and non-executive chairman Amos Hostetter.

Hostetter, who helped engineer AT&T's acquisition of MediaOne Group Inc. last June-he was that MSO's largest single shareholder-has bought big blocks of AT&T stock over the past two months.

Between Nov. 3 and Dec. 5, Hostetter purchased 3.9 million shares of AT&T stock at prices ranging from $19.74 per share to $22.47 each for a total of $84 million, according to documents filed with the Securities and Exchange Commission. Those shares are now worth $93 million, based on AT&T's closing price of $23.25 each on Jan. 11.

Hostetter increased his holdings in AT&T during the period to about 43 million shares, or just under 1 percent of the company's outstanding stock.

The increase has also jolted the value of Hostetter's total holdings in AT&T from $876 million on Dec. 5 to $999.75 million on Jan. 11, an increase of nearly $124 million.

But the value of his AT&T stock is still a far cry from that of June 15-the day the MediaOne deal closed-when Hostetter's 37 million shares were worth about $1.3 billion.

As Hostetter quietly accumulated shares, another large AT&T shareholder dumped his stock.

Liberty Media Group Inc. chairman John Malone has sold more than 4 million of his AT&T shares for $161 million between January and July 2000, decreasing his holdings to about 27.9 million shares, according to SEC documents. On Dec. 12 Malone filed documents to sell another 1 million shares, valued at about $21.4 million. That sale is still pending.

Hostetter declined to talk about his AT&T buying spree.

Crowell Weedon & Co. analyst Douglas Christopher called Hostetter's purchases a positive move for the stock.

"That's a good sign," Christopher said. "Big blocks of stock being bought at low prices should send some news to someone out there that the shares are inexpensive."

Though AT&T still has a long way to go to regain the 66 percent decline it enjoyed last year, Flannery said much of the downside has already been factored into the stock and that there's great potential for significant gains-particularly in its broadband and wireless units.

"We are encouraged by the performance of AT&T Wireless and increasingly positive on the cable business," Flannery wrote. "Indeed, we believe that AT&T Broadband may reach an inflection point this quarter, setting the stage for solid margin improvement and strong revenue growth starting in [the fourth quarter]."

Cablevision Systems Corp. might also want to send a thank-you card to Flannery.

Last Monday, Cablevision and AT&T Broadband closed a swap of Boston and New York-area systems that left Cablevision with 44 million shares of AT&T stock priced at $19.60 and worth about $870 million.

After the Morgan Stanley upgrade, the value of Cablevision's AT&T shares jumped $28 million in one day, as AT&T stock closed at $22.50 on Tuesday.

AT&T picked up Cablevision systems in Boston and Eastern Massachusetts that count 358,000 subscribers. In addition to the stock, AT&T paid Cablevision about $300 million in cash.

The Boston systems were sold at $5,000 per subscriber.

Cablevision added AT&T systems in the suburbs north of New York that count about 130,000 subscribers. The deal expands the MSO's core New York metropolitan cluster, which now passes 4 million homes and counts 3 million subscribers.

In September, Cablevision said it would roll out digital cable to 200,000 households in its Boston cluster. The launch appeared unusual at the time, considering the pending AT&T swap and the fact that the MSO still hasn't launched digital in its core New York market.

Cablevision launched digital in Boston using Motorola Broadband Communications Sector "DCT-2000" digital set-tops, middleware from Liberate Technologies Inc. and an interactive program guide from Source Media Inc.

AT&T Broadband has an exclusive IPG deal with Gemstar-TV Guide International Inc., so the company could be forced to replace the SourceGuide product with Gemstar's guide.

AT&T officials wouldn't say what they plan to do with the guide last week. "So soon after the closing, it's premature to announce what we plan to do," spokeswoman Tracy Baumgartner said.

Source Media CEO Steve Palley said: "We haven't gotten a definitive answer from them one way or another yet. But we're encouraged that they will [keep SourceGuide], and we're going to keep working to affect that result."

Gemstar-TV Guide spokeswoman Lauren Snyder didn't return calls.

AT&T, which has added about 5,000 New York-area subscribers since the agreement was announced, is paying Cablevision $8 million less in stock and $16 million more in cash than the terms of the original deal, announced last April. AT&T originally planned to pay Cablevision $878 million in stock and $284 million in cash, according to the April 18 announcement.