I thought we might see a little bump today over the ATT-Time Warner agreement (finally completed), I guess I was wrong <g>:
FOCUS-AT&T, Time Warner set phone service over cable wires
February 1, 1999 08:28 AM
NEW YORK, Feb 1 (Reuters) - AT&T Corp. T , the nation's largest telecommunications company, and media giant Time Warner Inc. TWX have formed a joint venture to offer phone service over Time Warner's cable television wires in 33 states, the companies said on Monday.
The partnership, widely anticipated since last July, will be 77.5 percent owned by AT&T and 22.5 percent owned by Time Warner.
The pact follows AT&T's proposed $48 billion agreement to buy cable television giant Tele-Communications Inc. TCOMA . The two deals will allow AT&T to reach more than 40 percent of U.S. households. AT&T aims to provide local phone service over the cable companies' networks instead of using traditional copper phone lines.
"Today's announcement with Time Warner will significantly advance AT&T's ability to offer end-to-end 'any distance' communications services to American consumers and businesses," AT&T Chairman C. Michael Armstrong said in a prepared statement.
The joint venture will offer multiple phone lines per household, along with features such as conference calling, call waiting, call forwarding, and individual message centers for family members.
The two companies expect to offer the service in pilot programs in one or two cities by the end of 1999 and to begin broader commercial operations in the year 2000. They have also agreed to jointly market communications services and develop other services, such as video telephony.
AT&T will fund the joint venture's negative cash flow, but after three full years of operation the partnership should have positive cash flow and be making a profit with annual revenues of $4 billion, the companies said.
The venture will have exclusive rights to offer residential and small-business telephony services over Time Warner's cable systems for 20 years. It will pay $15 to Time Warner for each home its network reaches. The payment, which will be made in two annual installments, is expected to total about $300 million.
The venture also will pay a monthly fee of $1.50 per telephone subscriber, rising to $6 per month over a six-year period. AT&T said this fee, even at the highest level, is far below the best rate offered by incumbent local telephone companies for leasing the wires to people's homes.
Time Warner will be responsible for upgrading its cable systems to support phone service. It expects the upgrade to be 85 percent completed by the end of the year and finished by the end of the year 2000.
AT&T will be responsible for the joint venture's capital expenditures, including the cost of powering the system. AT&T will also pay for the cost of adding the communications equipment to people's homes, which will cost $300-$500 per home, depending on whether the customer already subscribes to Time Warner's video service.
AT&T is expected to forge similar pacts with Comcast Corp. CMCSA , Cablevision Systems Corp. CVC and other cable companies as it tries to provide local phone service to the entire U.S. using cable telephone lines.
((--Jessica Hall, New York newsroom 212-859-1729)) REUTERS
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