AT&T cable chief steps down

Leo Hindery Jr., chief executive of AT&T's cable business unit, is leaving to pursue other interests but will continue briefly as a strategic adviser to chief executive C. Michael Armstrong, the company said. Hindery will advise Armstrong on cable matters, with a specific focus on acquisitions and industry relations.

The departure comes at an awkward time for AT&T, which is upgrading its newly acquired cable networks to offer local telephone service and high-speed Internet access--all part of Armstrong's effort to rebuild the company as a full-service communications provider.

Until a permanent replacement is named, Amos Hostetter, a member of AT&T's board of directors and formerly an executive at cable operator MediaOne Group, will work on the development of AT&T's broadband strategy, staffing, and industry relations. In the meantime, AT&T chief financial officer Daniel Somers will run the daily cable operations, Hindery said.

"We [Armstrong and I] both grew to conclude that I wasn't going to be there long term," Hindery said in a telephone interview with CNET News.com. "That's very personal. We came to the decision on Monday, and we came to it swiftly, for the good of the organization."

The resignation raises questions about AT&T's cable plans, which have been a source of controversy and speculation since the communications behemoth bought TCI for a record $48 billion last year.

Although the acquisition was widely viewed as a coup that gave AT&T an instant broadband Internet strategy, it has been fraught with complications. The company is fighting political battles with local governments as well as with key partners such as Excite@Home over the pace and quality of cable Net services.

"It will impact AT&T some because he was a well-known figurehead for the cable unit, though Hostetter is a good choice. Hindery was a cable guy who had a lot of connections in the business," said Boyd Peterson, an analyst with The Yankee Group in Boston.

Hindery's resignation comes at a critical time for AT&T, which only yesterday saw rival MCI WorldCom buy Sprint for $129 billion in the largest corporate merger in U.S. history. The combination of the two AT&T competitors--the second- and third-largest long distance telephone carriers--could pose a major threat to Ma Bell.

Last week, AT&T confirmed that it is considering possible business deals related to Excite@Home, despite vehement denials by Hindery only a day earlier. In its official statements, AT&T declined to reconcile the apparent conflicts with Hindery's statements.

Yet Hindery today denied that his departure was spurred by the recent developments at Excite@Home or in the telecommunications industry at large.

"[My departure] had nothing to do with Excite@Home. It had nothing to do with Sprint-MCI," Hindery added.

But this exit is more than just bad timing, some industry observers said. AT&T continues to have trouble keeping its executive talent--which includes losses such as Joe Nacchio, now CEO at Qwest Communications International, among others.

"This is a continuation of a disturbing trend at AT&T," said Brian Adamik, senior vice president for telecommunications research at The Yankee Group. "They can't seem to hold on to their senior executives, especially within their consumer division."

Trend or not, sources say Hindery--an outspoken, old-school executive--inevitably would have clashed with the Web culture in which the cable industry finds itself increasingly enmeshed. For this reason, as well as other internal political conflicts, Hindery's unusual public remarks on the Excite@Home matter were not entirely out of character.

But some say even Hindery could not accomplish what was asked of him at AT&T--such as inking cable phone deals with Time Warner and Cox Communications.

"I think Hindery was given an impossible task," Adamik said. "I think that he found out it was impossible to do some of these deals."

In some ways, the departure of Hindery marks the end of TCI's old guard in the post-merger era.

"Hindery was an intersection between the cable and telecom world for AT&T. They'll have to find someone who can span that bridge," Peterson said. "The decision to put Hostetter in there is good because he's like an elder statesman of the cable industry, but not as technical as Hindery."

Peterson, who said Hindery's resignation had been rumored in some circles for a while, expects AT&T to look for someone who is technically inclined and who thinks strategically.

Armstrong said the company's plans to offer new broadband services remain on target, including cable telephony pilots in eight cities by the end of the year.

"All of us believe in Mike's strategy and are committed to it," Hindery said today, assuaging questions about the progress of AT&T's network upgrades and cable telephony deployments.

Armstrong acknowledged Hindery's role in making Ma Bell more than just the nation's largest long distance phone company.

"Leo Hindery's vision, energy, and determination helped shape the future of the new AT&T in a remarkably short period of time," Armstrong said in a statement. "He was an early advocate for expanding our cable footprint and saw how we could better serve our customers by clustering cable properties through sales and trades. No one contributed more to the achievement of those goals."

Hindery reiterated that although his resignation is effective immediately, he will stay on at least until several cable swaps--in which AT&T is expected to trade cable systems with other operators to help each gain a geographic advantage--are completed.

"I am taking a different role now. I'm going to help Mike Armstrong with several of these deals that I'm very publicly committed to completing, and when those are finished, I'll move on," Hindery said.

News.com's Corey Grice contributed to this report.