Wall Street upbeat on AT&T Wireless spinoff

The company began trading as an independent venture Monday, formalizing its spinoff from AT&T. The company was launched as a tracking stock from AT&T in April 2000, raising a whopping $10.6 billion.

It's becoming an independent company as part of AT&T's larger restructuring plan, which involves dividing the telecom giant into four parts: wireless, consumer, business and broadband. The breakup has run into a major roadblock, however: Cable company Comcast announced Sunday that it would attempt a hostile takeover for the broadband unit.

The wireless spinoff involved a share exchange program that allowed AT&T shareholders to trade in their shares for stock in the new company. Stakeholders agreed to trade in 372.6 million shares, a number that was considerably less than what AT&T and analysts had expected.

AT&T distributed 1.136 billion shares of AT&T Wireless stock to AT&T shareholders, at a ratio of 0.3218 Wireless shares for each AT&T share. AT&T Wireless tracking stock will be exchanged on an equal value for the new stock, which will continue to trade under the AWE symbol.

"We're prepared and ready on all fronts," AT&T Wireless CEO John Zeglis said in a release. "As an independent company, we expect to have increased operational agility, more efficient deployment of resources and enhanced customer responsiveness."

Shares were down 39 cents to $16.56 by market close.

The new company will be the largest independent wireless company in the United States, with 15.7 million subscribers. It posted revenue of $10.4 billion in 2000.

Analysts were generally happy to see the stock broken free of the parent. Despite having one of the largest public offerings in history, the stock had languished, losing about half its value.

"We believe that now that there has been final separation of corporate governance, AT&T Wireless will be far better able to manage its operations directly in its own interests without distractions, interdependence, or interference from AT&T headquarters," wrote Tucker Anthony analyst Thomas Friedberg. He raised his rating on the stock from "buy" to "strong buy" and increased his target price for 2001 from $24.24 to $29.39.

AT&T Wireless "has been executing on its plan for margin and market share expansion," wrote Robinson Humphrey analyst Jason Bell. "We are comfortable with our estimates and feel upside potential is likely. Strong second-quarter results from others in the industry recently have further added to our confidence in the model for the quarter."

Investors could also benefit from the large supply of shares available, wrote CIBC Oppenheimer analyst Harvey Liu. AWE was recently added to the Standard & Poor's 500 list and will be snapped up by index funds that follow that list. But Liu estimated that the supply of shares available will outstrip demand from the index funds by $400 million, bringing the price down.