Business News - AT&T Buys NorthPoint

Posted: 05/2001

AT&T Buys NorthPoint
By Josh Long

In a $135-million agreement, the United States Bankruptcy Court has given
AT&T Corp. (www.att.com) the go-ahead to
purchase most of the assets belonging to NorthPoint Communications Group (www.northpoint.net)–the
embattled DSL wholesaler who lost out on a golden future when Verizon
Communications Inc. (www.verizon.com) nixed
a merger agreement last November.

The purchase agreement, which is subject to regulatory approval and other
conditions, was expected to close by the end of May.

AT&T gains access to more than 1,900 collocation facilities containing
nearly 3,000 DSLAMs, more than 100 ATM switches, OSS hardware and software, and
two leased buildings, including computer equipment and a network control center,
according to AT&T.

The purchase agreement bolsters AT&T’s plans to offer residential DSL
service, said June Rochford, an AT&T spokeswoman. AT&T is mulling
whether to offer local, long-distance and Internet access over the same line.

"DSL is going to be a key focus for us in 2001 and beyond," she
said.

Telecommunications analyst Jeff Kagan (www.jeffkagan.com)
said the acquisition gives AT&T the "tools to offer DSL to many of
their customers."

In the past, he said, AT&T had no means to directly reach the customer,
and management was unwilling to fork over the cash to purchase a DSL
provider–until the recent "fire sale."

"NorthPoint isn’t the answer to all of AT&T’s prayers, because in
the scheme of things it’s still an itsy-bitsy company, but perhaps we are
starting to see the beginnings of AT&T’s strategy to turn their ailing
consumer business around," Kagan said. "All of a sudden, they are
starting to answer the question of how they are going to offer DSL."

Meanwhile, NorthPoint said it would discontinue service to its business and
residential customers by early April.

NorthPoint President and CEO Liz Fetter told customers in a letter online
that the company was negotiating interim funding with ISP partners to support
the transfer of customers to alternative DSL providers.

Businesses comprised 60 percent of the wholesaler’s customer base. In all,
North-Point owned more than 100,000 DSL lines on its nationwide network in 109
metropolitan statistical areas, said NorthPoint spokesman Marvin Wamble. The
company delivered its services to businesses and homes through such wholesale
customers as XO Communications (www.xo.com),
Telocity Inc. (www.telocity.com) and MSN
Corp. (www.msn.com), who partnered with
RadioShack Corp. (www.radioshack.com) in
the program.

AT&T is not picking up NorthPoint’s customers, Rochford said.

"We went in and we purchased what we thought was in the best interest of
the business, and that was to get this infrastructure," she said.

An official close to the deal said AT&T also did not purchase network
equipment required to deliver DSL to businesses. AT&T’s consumer business
will provision DSL services.

Rochford said AT&T expects that some NorthPoint employees would be
offered jobs with the company. She could not provide further details.

NorthPoint says it would have avoided filing for Chapter 11 protection with
the U.S. Bankruptcy Court in January had it merged with Verizon Communications
as planned. Per the agreement, NorthPoint would have received hundreds of
millions of dollars in financing. Verizon, however, withdrew from the merger
agreement last November, citing deterioration in its future partner’s business,
operations and financial condition.

In response, NorthPoint has filed a lawsuit against Verizon in California
Superior Court, claiming the carrier had no right to nix the merger agreement. A
jury will hear the case in San Francisco, according to Wamble. A trial date has
not been scheduled, he said.