What do you think the final restrictions will be on the AOL/TWX merger?
Did you notice that as we get closer to the AOL/TWX decision, Armstrong is making more noise?
biz.yahoo.com
Tuesday October 10, 6:10 pm Eastern Time
AT&T Says Time Warner Deal Not Likely
By Jeremy Pelofsky
WASHINGTON (Reuters) - As chances for a deal dwindle, AT&T Corp. (NYSE:T - news) said on Tuesday regulators may have to act to unwind the cable giant's stake in Time Warner Inc's (NYSE:TWX - news) entertainment unit as part of the government's review of the America Online Inc. (NYSE:AOL - news) purchase of Time Warner.
Regulators are concerned that if AOL acquires No. 2 U.S. cable company Time Warner, the new company will have a tie to AT&T, the largest U.S. cable group, through a joint venture in cable systems that could raise anti-competition questions.
AT&T discussed its 25.5 percent stake in Time Warner Entertainment and negotiations about divesting it in a letter to the Federal Communications Commission, dated Oct. 4 and made available on Tuesday.
``In the absence of a negotiated settlement between the parties, which appears unlikely, the only alternative to the uncertainties created by the registration rights process would be an obligation on both parties to ensure the fair and timely termination of the partnership,'' AT&T General Counsel James Cicconi told the FCC in the letter.
AT&T said it could only unilaterally sell the stake in the unit by taking steps with securities regulators to register its holdings for possible sale. AT&T did not elaborate in the letter.
A Time Warner spokesman said Tuesday the talks with AT&T about the stake in the entertainment unit were ``ongoing.''
If the FCC or Federal Trade Commission (FTC), the agencies reviewing the AOL-Time Warner deal, required those ties to be severed as a condition of the deal, the new company would likely have to buy out AT&T.
``AT&T is getting nowhere in the negotiations and trying to create an action forcing event for Time Warner,'' said Scott Cleland, chief executive of the independent research firm The Precursor Group.
Until now, Time Warner has had no reason to buy AT&T's stake at a potential premium price unless the government made it a condition of the AOL-Time Warner deal.
Time Warner has ``AT&T's money captive and they don't have to listen to them,'' he said.
The FCC is reviewing the AOL-Time Warner deal to determine whether it is in the public interest, while the FTC is weighing possible anti-competition issues.
An AT&T official said the company recognizes that the addition of AOL to the cable partnership raises regulatory concerns and has been the subject of discussions with the FCC, but declined further comment.
However, lawyers for AOL and Time Warner recently told the FCC that the AT&T stake would not affect competition, and separation should not be a condition of the deal.
``Neither through ownership nor contractual relations will this merger give rise to any 'AT&T connection' that would harm competition in any relevant area,'' AOL and Time Warner said in an Oct. 5 letter to the FCC.
AT&T bought cable company MediaOne Group Inc. earlier this year. As part of the deal, it acquired a 25 percent stake in Time Warner Entertainment, which owns all of the cable systems, Warner Bros. and Home Box Office.
As a condition of the MediaOne combination, AT&T was given three options by the FCC to fall below the agency's 30 percent cap in the cable subscriber market. One was to get rid of its stake in the Time Warner unit, an action that had little downside compared to the alternatives.
The other options are selling some of Liberty Media Group (NYSE:LMGa - news), which has tax consequences, or selling some of the cable systems it acquired. AT&T must decide on an option by mid-December and follow through by mid-May.
``AT&T may not unilaterally dispose of its interest in the Time Warner Entertainment LP except through a registration rights process that could not commence until approximately Jan. 1, 2001,'' AT&T's Ciconni said.
AT&T said it would not be able to fully dispose of the stake before May 19, 2001, he added.
Ciconni said he spoke about the issue with FCC Chairman William Kennard's chief of staff, Kathryn Brown, on the telephone Oct. 3-4.
AT&T shares ended up 1/4 to $26-7/8 on the New York Stock Exchange. Time Warner rose 75 cents to $85.10, and AOL added 16 cents to $57.24, both on the NYSE. |
