AT&T's Offspring

By Bill Mann (TMF Otter)

(Oct. 19, 1999) -- You're cleaning out your grandparent's attic when you come across a lockbox. Contained within, among various personal documents, you find 100 stock certificates of AT&T, issued in 1983. Your grandparents, who, if the attic is any indication, never sold anything, bought a round lot of AT&T almost 20 years ago and just forgot about it.

So how much are the shares worth? Well AT&T's valuation is slightly more problematic than that of any other company, since the Ma Bell of 1980 has since been broken up into not two or three, but ten very large and substantial companies. Shares of AT&T bought and held before 1984 would now provide the owner with portions of AT&T as well as the following companies:

  • BellSouth
  • SBC Communications (completed merger with Ameritech on October 8, 1999)
  • Bell Atlantic
  • Ameritech (completed merger with SBC Communications on October 8, 1999)
  • US West
  • Lucent Technologies
  • NCR
  • Vodaphone Airtouch
  • MediaOne

The first five of these companies are the "Baby Bells," the companies that inherited regional operations for AT&T's local services following the federally mandated divestiture of AT&T's local telecommunications assets. So fine, these companies are regional telephone companies, but how does a Fool differentiate them? And what do Lucent, NCR, and today's AT&T do?

No problem. We'll just go down the list and detail the business of each one. Finally, we'll figure out how much those 100 shares of AT&T are worth today.

So let's look at each company, starting with the Baby Bells. (All values are as of the market's close on October 15, 1999.)

BellSouth (NYSE: BLS)
Market Cap: $78 Billion
P/E: 24
Dividend Yield: 1.8%
Company Headquarters: Atlanta

BellSouth Corporation is an international communications services company. It has more than $37 billion in assets, over 23.6 million access lines, and 5.8 million cellular customers worldwide. Employees total more than 86,000 people throughout the U.S. and 20 other countries in Latin America, Europe, Asia, and the Pacific. BellSouth components provide basic telecommunications services in their regulated regions, including local calling, yellow pages, broadband/cable, BellSouth Mobility cellular services, and Internet services. BellSouth provides services to more than 31 million customers internationally. 1998 revenues exceeded $21 billion.

On a wholesale basis, BellSouth offers termination services throughout its service network, for both communications and data service providers.

External to its local carrier region, BellSouth provides long distance services via a subsidiary company, BellSouth Long Distance; but like other Baby Bells, it does not have regulatory approval to provide long distance in its own region.

Internationally, BellSouth owns all or part of integrated communications companies in Chile, Brazil, China, Israel, Nicaragua, Panama, Denmark, Uruguay, Venezuela, Germany, Peru, and Ecuador, providing domestic, international, and wireless services. BellSouth currently serves overseas in regions with a potential 100-million-person customer base and announced a 95% year-over-year growth of customers in 1998.

BellSouth also owns approximately 10% of Qwest Communications (Nasdaq: QWST), an Internet backbone provider with some 18,000 miles of fiber optic cable in the U.S.

What you received in 1984: For each 10 AT&T shares, you received 1 BLS share = 10 shares
What you have now: 282.5042 Shares
Value: $11,941.83

Bell Atlantic (NYSE: BEL)
Market Cap: $99 billion
P/E: 31
Dividend Yield: 2.34%
Company Headquarters: New York

Bell Atlantic comprises two of the seven former Baby Bells: Bell Atlantic and NYNEX. The two companies merged in 1998 to form a single company with a service area running from Maine to Virginia. Bell Atlantic Corp. is an international telecommunications company operating in four segments: domestic telecom, global wireless, directory services, and international services.

Bell Atlantic's domestic telecommunications region covers 22 million households and serves over 30% of the business market of the United States. Total operating revenues for this segment exceeded $25.5 billion in 1998, a majority of the $35.5 billion total revenues for all of Bell Atlantic's business segments.

The company is also in the process of completing a merger with GTE, which would add significant switching, equipment, long distance, and customer service facilities to its current asset base, and would add an additional $70 billion to its market cap.

Bell Atlantic's wireless operations include Bell Atlantic Mobile, which provides cellular services throughout the East Coast, as well as minority stakes in PrimeCo (U.S.-based PCS provider), Grupo Iusacell (Mexico), Omnitel Pronto Italia (Italy), EuroTel Praha (Czech Republic), EuroTel Bratislava (Slovakia), STET Hellas (Greece), Excelcomindo (Indonesia), and TuKa (Japan). Aggregately, these components have seen revenue growth in excess of 25% per annum over the last three years.

Globally, Bell Atlantic is the largest single publisher of directories with 80 million produced annually, in the U.S., Greece, Poland, Gibraltar, Slovakia, China, and the Czech Republic. The company also sponsors Big Yellow, an Internet directory service with more than 2 million page views a month.

In international wireline communications, Bell Atlantic has a mix of mature and start-up businesses. These include an 18% stake in Cable & Wireless, 37% of FLAG Telecom (a fiber optic cable running from London to Tokyo and landing in 15 countries en route), and various minority holdings in Gibraltar NYNEX, Reliance Telecom (India), Telecom New Zealand, BayanTel (Philippines), and smaller holdings in Indonesia and Thailand.

What you received in 1984: For each 10 AT&T shares, you received 1 BEL share = 10 shares For each 10 AT&T shares, you received 1 NYNEX share = 10 shares
What you have now: 194.8223 Shares
Value: $12,444.27

NextMore Baby Bells, the Spin-offs, and What It's All Worth