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Wednesday June 24, 12:30 am Eastern Time
AT&T seen close to deal with TCI
NEW YORK, June 24 (Reuters) - AT&T Corp. was rumored to be close to an acquisition of cable television giant Tele-Communications Inc.(TCOMA - news), analysts and industry sources said Tuesday evening.
New York-based AT&T declined to comment.
A spokeswoman for TCI, based in Englewood, Colorado, declined to comment specifically on the AT&T rumors, but she said the company may make an announcement as early as Wednesday. She decline to discuss the topic of the expected announcement.
One investment banker, who declined to be named, said one scenario had AT&T buying TCI for $50 a share.
Shares of AT&T gained $2.75 on Tuesday, building on gains in its share price over the past week. It closed the day on the New York Stock Exchange at $65.375 a share.
TCI added $3 a share to close on Tuesday at $38.6875 in Nasdaq Stock Market trading.
AT&T has been the subject of several merger rumors over the past week, including speculation that the long-distance giant would buy America Online Inc. (AOL - news), the nation's largest online service provider, or forge an international alliance with British Telecommunications Plc.(quote from Yahoo! UK & Ireland: BT.L).
BT has been searching for a U.S. partner after losing a bidding war over MCI Communications (MCIC - news) to WorldCom Inc. (WCOM - news) earlier this year.
A purchase of TCI, which has been rumored on-and-off for months to be on the auction block, would give AT&T a direct link to consumers homes and a way to provide local telephone service using cable television wires instead of traditional phone lines.
AT&T has been hesitant to join with any cable company until they upgraded their cable networks to allow for both voice and data communications traffic.
AT&T's new chairman, C. Michael Armstrong, said earlier this year his company would not pay to upgrade the cable companies own networks for them.
Armstrong's comments had temporarily cooled speculation that AT&T would buy a cable company.
TCI was the top cable operator in the U.S. several months ago and is currently in the process of selling some systems, which would bring it into the second place position behind Time Warner Inc.(TWX - news).
TCI is currently upgrading its vast cable wire system with the latest digital technology, including cable set-top boxes, which will allow subscribers to shop interactively, as well as allow TCI to offer a variety of services such as telephony and Internet access.
In January AT&T agreed to buy Teleport Communications Group Inc.(TCGI - news), a new type of telecom company that provides communications services to small and mid-size businesses.
That deal however left AT&T searching for a way to provide local phone service to consumers.
Teleport was backed by several cable companies, which together will own 10 percent of AT&T after the Teleport acquisition closes. AT&T's new ties with Teleport's cable backers and its need to find a local telephone strategy for consumers has kept the rumors of a possible deal with a cable company alive.
A deal with TCI ''would give AT&T instant access to millions of homes and round out its local phone strategy,'' said Jeffrey Kagan of consultancy Kagan Telecom Associates.
TCI chairman John Malone gave over day-to-day operating control to president Leo Hindery, who has strengthened the business and won praise from Wall Street.
Hindery was holding a room reservation at Manhattan's Waldorf-Astoria hotel Tuesday night, but did not immediately return a reporter's phone calls.
Jessica Reif, an analyst with Merrill Lynch, said a deal between AT&T and TCI would change the face of the cable industry. |
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