New York AT&T Corp. is breaking itself into smaller companies for the third time since 1984, scrapping its vision of one-stop shopping for communications services and dismantling a telephone and cable TV empire that took three years and more than $100 billion to build.
As details emerged Wednesday on terms of the widely expected breakup, AT&T shares fell more than 13 percent.
The company formally disclosed plans to create four distinct entities, including an independent cable company and an independent wireless company, all operating under the AT&T brand name.
The other two businesses will be the core of a new AT&T Corp., consisting of the unit that runs the company's huge telecommunications network and serves business customers, and a separately traded subsidiary containing the shrinking consumer long-distance business.
Under the plan, shareholders of AT&T, the fourth most widely owned stock in the country, will exchange their stock for shares in each of the new businesses.
But in a move that may not sit well with AT&T's large base of individual investors who have owned the stock for decades, the company said the combined dividend paid by the four stocks is expected to be "substantially less" than the current annual payment of 88 cents per AT&T share. Based on AT&T's beaten-down stock price, that dividend amounts to a cash investment return of more than 3 percent per year, an unusually high yield for a major company.
Investors also weren't pleased after AT&T warned separately that it would earn 29 to 33 cents per share in the fourth quarter ended Dec. 31. Analysts surveyed by First Call/Thomson Financial were expecting 36 cents per share.
AT&T shares fell $3.63, or 13.3 percent, to $23.56 as investors digested details of its plan and a warning about fourth-quarter earnings.
The restructuring plan is expected to be completed in 2002.