AT&T Wireless Says It's Examining Offers, Reports Bad QuarterAT&T Wireless Says It's Examining Offers, Reports Bad Quarter

AT&T Wireless acknowledged Thursday that it had a bad fourth quarter and confirmed that it's exploring strategic business options, including being acquired by another wireless operator.

"We've received significant interest from a number of other companies," AT&T's chairman and CEO John D. Zeglis said during a conference call. "There has been so much interest and so many approaches that we see this as an opportune time to explore the options."

Zeglis didn't mention specific suitors or options, but did call the interest from other operators, "a flattering affirmation of the growth path we're on and the strategic choices we've made." He stressed that the company has no timetable for decisions related to selling to or otherwise partnering with other wireless operators.

"We'll be thorough and we won't be rushed," Zeglis said.

Reports this week said Cingluar has made a cash offer to acquire AT&T Wireless and that there has been strong interest from a variety of other wireless operators including Vodafone and Nextel Communications. To help the company review the options, AT&T Wireless said in a statement that it has retained the services of both Merrill Lynch & Co. and the law firm Wachtell, Lipton, Rosen & Katz.

While AT&T Wireless had a good year overall, Zeglis acknowledged that the just-completed quarter was poor.

"Since our IPO, we've had some great quarters to report," Zeglis said. "The fourth quarter of 2003 isn't one of them."

He blamed the bad quarter on a serious back-office software glitch that made it difficult for customers using the operator's old TDMA network to transition to its GSM system. That glitch resulted in an unexpected number of customers moving to other operators.

In addition, Zeglis acknowledged technical problems with administering wireless local number portability, a federal mandate that enables users to switch to other characters and take their existing phone numbers with them. The mandate went into effect Nov. 24.

"The bad news is our systems problems cost us and we had more (customer) deactivations in the quarter," he said. "Frankly, our customer service went pretty far south in those months (November and December) It'll take some time to dig out of the hole we made for ourselves."

He said the company lost far more customers to local number portability than it gained, although he insisted that the company's "churn rate" because of it now is about the same as other operators. He also stressed that the systems problems have been solved and that the company would now focus on regaining customers.

Zeglis stressed that there were a lot of positives for the year. Overall increased sales resulted in $1 billion in cash on the company's balance sheet. In addition, business adoption of the company's 2.5G Edge data network was strong. The company reported more new data subscribers in December than in the first five months of the year combined.

The company reported an $84 million net loss for the fourth quarter, compared with a loss of $134 million for the same quarter a year ago. Operating income before depreciation and amortization was $890 million for the quarter, a decrease of 2.6% compared with the year-ago quarter.