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AT&T seeks pact with Bells
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May 20, 1998: 3:29 p.m. ET
Long-distance carrier asks Baby Bells to sell its service; predicts doubling growth
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NEW YORK (CNNfn) - With a favorable court ruling on its side, AT&T has contacted the nation's six leading local phone service companies about a possible partnership whereby the local providers would sell AT&T's long-distance service to its customers, Chairman C. Michael Armstrong told shareholders Wednesday.
Armstrong said AT&T contacted the nation's five regional Bell operating companies plus GTE late Tuesday to discuss distribution channel alliances.
Initially, he said, AT&T opposed such partnerships -- first proposed by long-distance competitor Qwest Communications and local service providers US West and Ameritech -- because "we did not think it was in the spirit of the Telecommunications Act of 1996."
The company last week, in fact, joined MCI Communications Corp. and several other long distance companies in a lawsuit against Ameritech and U S West to stop them from selling Qwest's services.
"But a recent court ruling suggests it may be permissible," he said.
Armstrong Wednesday also told CNNfn that AT&T approached competitor MCI about buying its Internet backbone.
Reports indicate MCI may be looking to unload the asset to ease regulatory concerns over its $37 billion marriage to WorldCom Inc. (81K WAV or 81K AIF)
At the 113th annual shareholder meeting, Armstrong also told investors he expects AT&T to meet Wall Street's earnings estimates of 73 cents per share for the second quarter and $3.28 for 1998.
Despite the company's poor performance in the industry, he added, AT&T is poised to double its growth this year and again in 1999.
And he said the company will focus its energies on the burgeoning arena of Internet services.
AT&T has experienced a 200 percent annual growth rate in its Internet business services and already hosts more than 8,000 business Web sites.
With up to 75 percent of Internet traffic stemming from messaging, chat and e-mail transactions, Armstrong noted the telecommunications titan will continue targeting those customers as well. (323K WAV or 323 AIF)
Earlier this month, AT&T teamed with Yahoo! Inc. to market its products on the popular Web site.
The partnership, part of a growing industry trend, will enable Yahoo! users to purchase AT&T's long-distance services, calling cards, prepaid cards and AT&T WirelessServices.
The companies also plan to launch a new Internet-based consumer communications service on the site.
AT&T already has partnered with Excite Inc., another popular Internet search tool, under a three-year agreement to introduce Excite Online Powered by AT&T WorldNet Service.
The service is expected to compete against Yahoo! Online, the joint venture of Yahoo! Inc. and MCI Communications Corp., which was announced in March.
Armstrong said he doesn't believe long-distance and local telephone service competition, as envisioned by the Telecommunications Act, will become a reality until at least the year 2000.
"Unfortunately, nothing is going to happen very soon because the Telecom Act of 1996 went straight from Congress to the FCC for regulation, interpretation and never made it out of litigation," he said.
Armstrong acknowledged the road ahead is rocky and competition is fierce, but said AT&T should not be underestimated. (240K WAV or 240K AIF)
AT&T shares, the most widely held stock in the country, climbed 1-1/2 to 57-15/16 mid-day Wednesday on the New York Stock Exchange.
-- by staff writer Shelly K. Schwartz
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