Friday January 9, 5:24 pm Eastern Time
Teleport deal gives AT&T closer ties to cable
By Jessica Hall
NEW YORK, Jan 9 (Reuters) - AT&T Corp's (NYSE:T - news) proposed $11.3 billion acquisition of
Teleport
Communications Group Inc (Nasdaq:TCGI - news) gives Ma Bell a way to develop Internet telephony
and local residential
telephone services through its new ties with Teleport's cable television backers.
''AT&T's going to give control of the local strategy to Teleport management. And since Teleport was
nurtured by the cable
guys, you could expect a much closer relationship between AT&T and the cable industry given their
mutual respect for
Teleport,'' said Laura Martin, media analyst with First Boston.
As part of the Teleport acquisition announced Thursday, Tele-Communications Inc (Nasdaq:TCOMA
- news;
Nasdaq:LBTYA - news; Nasdaq:TCIVA - news), Cox Communications Inc (NYSE:COX - news)
and Comcast Corp
(Nasdaq:CMCSA - news) will see their combined 66 percent stake in Teleport converted into a ten
percent stake in AT&T.
These cable companies have already dabbled in providing local phone service over cable television
wires and also hold a
majority-ownership stake in companies such as @Home Corp (Nasdaq:ATHM - news), which
provides Internet services over
cable television wires.
These ventures could be the launching pad AT&T needs to enter these markets, analysts said.
''It's likely that in the talks with Teleport, AT&T had talks with the cable company owners. And some
of those discussions
could have touched on @Home or other relationships,'' Martin said.
AT&T declined to comment about possible ventures with the cable companies.
In addition to @Home, the cable companies offer a way for AT&T to reach residential customers,
analysts said.
''AT&T has limited options in the residential market. The end game will eventually be a merger with an
RBOC (regional Bell
operating company), but the regulatory environment needed for that to happen is not here yet,'' said
Tod Jacobs, a
telecommunications analyst with Sanford Berstein.
''It's expensive to launch a wireless local loop. So until an RBOC deal becomes more do-able, AT&T
could dabble in cable
as an option,'' Jacobs said.
Cox has made the most progress among cable companies in providing local telephone service. Cox
already offers service in
Orange County, Calif, and is expected to roll out in the rest of its market within two years.
The others have quietly backed off from the idea since the cost of upgrading the television lines to
transmit voice and data
services became too daunting, analysts said.
The cable companies have now shifted their priorities to digital TV, but having ties with AT&T could
make local telephone
service a more viable option in the future, analysts said.
''The focus now is on digital TV and high speed data transfer, but these investments in the telecom
market let the cable
companies hedge their bets in a variety of areas as they wait for the telecom market to shake out,'' said
Chris Dixon, a cable
analyst with PaineWebber. |
