AT&T, Time Warner Strike Phone Deal
By DAVID E. KALISH=
AP Business Writer=
NEW YORK (AP) _ AT&T Corp. has struck a deal to offer telephone
service over Time Warner Inc.'s cable systems in 33 states, greatly
escalating the long-distance phone company's move into local
service.
The deal comes as AT&T is close to completing its purchase of
Time Warner's biggest rival in the cable TV industry,
Tele-Communications Inc.
AT&T had been widely reported to be talking with Time Warner
about the possibility of offering phone service over its cable
systems.
In the deal announced today, AT&T and Time Warner expect to
begin offering the new service in one or two cities by the end of
1999 and begin broader commercial operations in the year 2000.
AT&T said today's deal, its acquisition of TCI and arrangements
with other cable TV companies will give it the potential to supply
local phone service to 40 percent of U.S. households, or 35 million
homes, over the next four to five years. AT&T's acquisition of TCI
is expected to be completed this spring. AT&T is talking with other
cable operators about deals, but declined to elaborate.
Customers will pay about 20 percent less for the venture's
package of long-distance and local phone service than what other
vendors could potentially offer, AT&T chief executive C. Michael
Armstrong told industry analysts this morning. In addition to phone
service, the new venture will offer interactive digital television
and high-speed Internet service.
''We will be the low-cost provider compared to any other way to
deliver these services and we will be putting together more bundles
on top of what we're announcing today,'' Armstrong said.
AT&T shares, the nation's most widely held, were up as much as 3
percent in early trading. The stock was up $1.81\ at $92.56\ in
midday trading on the New York Stock Exchange.
AT&T will own slightly more than three-quarters of the joint
venture and Time Warner the rest. AT&T estimates it will spend $600
million on costs resulting from the venture in the first two years.
In addition, it will spend between $300 and $500 to equip each home
to handle telephone services over cable lines.
Time Warner will get monthly fees ranging from $1.50 to $6 per
home over six years.
The arrangement is expected to have annual sales of $4 billion
after three years.
AT&T has been spending furiously to break into the $110 billion
local phone market at a time when its share of the long-distance
business is slipping.
In addition to its planned acquisition of TCI, the nation's
second-largest cable company, AT&T spent $11.3 billion last year on
Teleport Communications, a smaller local phone company.
AT&T hopes consumers will be enticed by the convenience of
receiving phone service channeled through the same cable TV
circuits that deliver hundreds of channels, Internet access and
online banking. |
