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from: The Street.com

AT&T's TV Efforts Smolder
By Scott Moritz
Senior Writer
1/15/2008 11:59 AM EST

AT&T's sputtering video effort, known as U-Verse, has been hit with a literally explosive setback.

Ma Bell has had four incidents involving smoldering batteries and, in at least one case, an explosion in one of the thousands of network cabinets used for its TV delivery systems, according to a report in telecom trade publication Light Reading.

AT&T said it is replacing 17,000 batteries, all manufactured by failed battery venture Avestor, according to the report.

AT&T Video Hits the Wall

The news comes as AT&T is already seeing home building slow in some markets and customers cancel service to take new offers from cable companies like Comcast (CMCSA) , as well as high-definition video packages from DirecTV (DTV) .

AT&T's plans to deliver Internet protocol television over a mix of fiber optic cable and DSL lines have been delayed and scaled back in recent years amid high costs and untimely glitches.

"This is just another in a long list of problems for them on the U-Verse project," says one industry consultant.

AT&T says the changes reflect the company's refocused effort in some markets.

The disappointment on the crucial so-called triple play bundle has some AT&T watchers wondering if the company may have to find a new video distribution strategy and start a new round of layoffs to manage costs.

Investors have been concerned about reports that AT&T's landline consumer business is under siege from rivals amid a slowing economy. But AT&T is thriving in areas like wireless, where it is expected to announce blowout subscriber numbers later this month.

AT&T says it stopped using the Avestor batteries early last year and that it is replacing the batteries "as soon as possible."

AT&T shares were down $1.03 to $37.48 Tuesday.