• The Wall Street Journal, Tuesday, May 8, 2007 11 AM

Telecom giant AT&T is so huge, its investors simply yawned when the company announced that its long-delayed Web-based TV system is costing $1.4 billion more than promised. Why? AT&T's capital spending budget won't move, even as it spends a grand total of $6.5 billion to move into the space dominated by cable companies. AT&T shares rose 12 cents following the news, closing at $39.60 yesterday. With its new TV service, called U-Verse, the telecom industry king plans to reach 18 million consumers in 13 states by 2008.

Analysts were mixed on U-Verse's prospects. Regardless, Rick Franklin, an analyst at the investment firm Edward Jones, said investors saw the move as "a vote of confidence" in U-verse by AT&T. "They've been very deliberate in their spending and wanting to make sure the technology worked," he said.

U-Verse will offer a wide-range of HDTV-quality content, which is partly the reason for the spending increase. The Microsoft-powered system is requiring more servers than the company initially anticipated. U-Verse is already live in 18 markets in Texas, California and Wisconsin, reaching a total of 2.8 million homes--but just 20,000 households have subscribed. If U-Verse under-delivers, analysts speculate that AT&T could acquire a satellite TV operator to help it gain a sizable share of the national TV market more quickly.

Read the whole story at The Wall Street Journal »