A nice summary of all the rumors and denials
news.excite.com
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AT&T, ExciteAtHome In Talks
By Eric Auchard
NEW YORK (Reuters) - U.S. phone and cable communications giant AT&T Corp. and Internet services company ExciteAtHome Thursday said they were still exploring possible deals tied to AT&T's majority stake in ExciteAtHome, despite a denial a day ago by AT&T it was in such talks.
In a brief statement, AT&T said it was responding to recent market speculation. These rumors have AT&T seeking to carry out an asset swap with America Online Inc., the world's No. 1 Internet services provider, which is seeking access to high-speed cable links for millions of its online subscribers.
Following the AT&T announcement, shares of ExciteAtHome gained $2.56 to $44 in after-hours trading, recovering from the decline that occurred in its share price during regular trading, when it fell $2 to $41.44 from Wednesday's close.
"We have periodically explored, and we continue to explore, many alternatives with respect to our Internet strategy and our ownership interest in ExciteAtHome," AT&T said late Thursday afternoon, adding: "The alternatives include internal options as well as discussions with third parties."
Later, ExciteAtHome issued its own statement: "The ExciteAtHome management team, in conjunction with our cable partners, has periodically explored, and will continue to explore, many alternatives for maximizing shareholder value." Shareholder value is investor jargon that typically refers to a strategic partnership or merger deal welcomed on Wall Street.
Neither company named potential buyers, nor did they directly address the America Online rumors, which focus on the idea that AT&T would be prepared to sell out its ownership of ExciteAtHome to AOL, then buy back the AtHome Network high-speed programming piece of the business.
The statements followed a report in Thursday's Los Angeles Times which said that AT&T had sent a formal proposal to the ExciteAtHome board this week to split that company in two. The story cited "sources close to the situation."
Both the statements and the newspaper report appeared to contradict comments by Leo Hindery, chief executive of AT&T's broadband and Internet services business, who denied Wednesday AT&T was in talks to sell its stake in ExciteAtHome to AOL.
"There have been no discussions underway whatsoever," he had said in a Reuters interview at the time. "I typically don't comment on things of that sort. But when it's absurd, I do." Hindery heads AT&T's cable TV operations and as such plays a key role in the company's ties to ExciteAtHome. He had emphasized: "There are no discussions underway to split the company between its content and distribution activities."
An AT&T spokeswoman declined to comment when asked to reconcile Hindery's comments and the company statement. She also declined to comment on the newspaper report that AT&T had proposed to split ExciteAtHome.
Control of the Redwood City, Calif.-based Internet company is divided among several U.S. cable operators including AT&T, which holds 58 percent of the voting rights but only a 26 percent ownership stake, according to an AT&T spokeswoman.
Cox Communications Inc. and Comcast Corp., which hold lesser positions, exercise veto power over any unilateral deal-making by AT&T, according to ExciteAtHome by-laws disclosed in recent regulatory filings.
The Los Angeles Times report said Atlanta-based Cox Communications, the No. 5 largest U.S. cable operator, is expected to veto AT&T proposal to split the company.
The story cited sources saying that talks on a deal between America Online and ExciteAtHome have broken down in recent weeks because of the companies inability to agree on whether AOL or the cable operators will maintain the relationship with customers in terms of payments and e-mail addresses.
Spokeswomen for Atlanta-based Cox and Philadelphia-based Comcast were not immediately available to comment. AOL spokesmen were unable to be reached late Thursday. They have repeatedly declined to comment on rumors of talks this week.
America Online is looking to offer high-speed Internet links to the more than 18 million subscribers of its flagship AOL service. While it has struck deals with several major U.S. phone companies and satellite transmission firms, AOL has failed to set similar deals with major U.S. cable operators.
In its statement, AT&T, of Basking Ridge, N.J., warned there was no assurance that any deal would occur, whether with ExciteAtHome or outside parties such as America Online.
AT&T said it would not comment further until it made a decision on its plans. The company is the No. 1 U.S. long-distance phone company and No. 2 cable TV operator.
AT&T could benefit from an AOL deal by gaining access to a vast new consumer audience, to which the phone and cable company would be able to deliver all forms of communications, including long-distance and local phone and Internet access.
Such a deal would free AT&T from the content programming parts of ExciteAtHome's business, and also help ease concerns about the vast market power of AT&T among U.S. regulators, who are now considering AT&T's $45 billion proposal to buy MediaOne Group, which would make it the No. 1 cable operator.
Several Wall Street analysts said Thursday they were convinced it was only a matter of time before a deal on high-speed Internet access would be worked out between AT&T, ExciteAtHome and AOL.
In a note to clients before AT&T and ExciteAtHome's comments were released, analyst Scott Ehrens of brokerage Bear Stearns & Co. wrote that "the probability of the two parties having future talks is high," referring to AT&T and AOL.
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