The plan to sell 10 to 15 percent of the wireless unit could raise $7 billion to $10 billion in what would be the largest initial public offering, according to reports.
With some wireless divisions of telecommunications companies outpacing the growth of the parents' main businesses, many telephone companies are beginning to spin off their lucrative wireless divisions into separate entities, hoping to gain higher valuations on the tracking stocks. Sprint and US West are among some telephone companies that already have offered tracking stocks.
AT&T Wireless Group will consist of AT&T's current voice and data mobility business, its fixed-wireless business and AT&T's international wireless operators. AT&T plans to file a proxy with the Securities and Exchange Commission in January, executives said. After its shareholders vote to approve the spin-off, the company plans to bring the new company to the public capital markets sometime in the spring, depending on market conditions.
AT&T executives noted that the new tracking stock will provide it the currency to expand its national and international reach.
"By highlighting the exceptional performance of AT&T's fast-growing wireless operations, we are confident that investors will see the value of this business," AT&T chairman Michael Armstrong said at a news conference here. "That unlocked value, which will be reflected in the tracking stock, will provide us with the currency to take advantage of the outstanding growth opportunities available in the wireless industry."
At the close of the market today, AT&T fell 0.19 to 56.81 on 16.6 million shares. The stock has traded as high as 64.06 and as low as 41.5 during the past 52 weeks.
The new enterprise will be led by John Zeglis, currently president of AT&T, who was tapped as chief executive. Daniel Hesse will remain CEO of AT&T Wireless Services mobility unit, and will also be the executive vice president of the AT&T Wireless Group.
Last month, Excite@Home, a cable-based Internet access provider owned largely by AT&T, said it would divide its stock to gauge the performance of its content and media division.
"We have chosen a tracking stock structure because it preserves the many benefits of having the Wireless Group as an integral part of AT&T," Armstrong said. "That includes use of the powerful AT&T brand, cross-marketing and bundling opportunities, purchasing, financing and network integration."
The new tracking stock is not expected to pay any dividends.
Zeglis declined to comment on the price and number of shares to be released on the public market.
"IPOs go from a percent to 19 percent so at this point we are able to say only that it will be under 20 percent," said Zeglis.
Goldman Sachs and Merrill Lynch are serving as financial advisers to AT&T in creating the AT&T Wireless Group tracking stock.
AT&T's wireless services has posted three consecutive quarters of 40 percent growth, and the unit expects to report revenues of more than $7.6 billion this year, the company said.