AT&T to Buy Remaining Stake in Lenfest for $2.2 Bln
New York, May 4 (Bloomberg) -- AT&T Corp. said it will buy the remaining 50 percent stake of Lenfest Communications Inc. it doesn't already own for $2.2 billion in stock, the No. 1 long- distance company's latest acquisition in the cable-TV industry.
Lenfest offers cable services in the Philadelphia area and has 1.5 million subscribers. AT&T will buy the remaining interest in the Wilmington, Delaware-based company from the Lenfest family for about 43 million shares of AT&T, or $2.2 billion based on AT&T's closing price of 51 9/16. Other terms weren't disclosed.
AT&T Chairman C. Michael Armstrong is accelerating his plan to use cable to offer high-speed Internet access and local phone services, just as Bell Atlantic Corp. and other local providers are within a year of offering long-distance service.
''Armstong's making the gutsiest moves AT&T has ever made,'' said Jeffrey Kagan, an independent cable-TV industry analyst based in Atlanta. ''He is literally betting the company's future on cable.''
The Lenfest move is the latest by AT&T into the cable-TV business and comes after talks to form agreements with other cable operators have taken longer than expected. AT&T missed its May 1 deadline to form a definitive agreement with Time Warner Inc. to use its cable lines to provide phone services. Instead of forming alliances, AT&T is buying cable companies.
''We're moving as quickly as we can,'' AT&T spokeswoman Eileen Connolly said. ''AT&T is committed to increasing its footprint and providing competitive local phone services.''
Near Comcast's Turf
Lenfest provides services in the greater Philadelphia area - - where the No. 3 cable-TV company Comcast is based. AT&T has bid $62.5 billion for Englewood, Colorado-based MediaOne Group after Comcast had already agreed to buy the No. 4 U.S. cable-TV company for a lower price.
MediaOne's board on Saturday voted to accept AT&T's offer and gave Comcast until Thursday to make a better offer. Comcast has talked with Microsoft Corp. joining it in sweetening the bid.
That has prompted speculation about AT&T working out an agreement whereby it would purchase MediaOne and compensate Comcast and Microsoft. The Los Angeles Times, citing sources close to the talks, said AT&T is negotiating to swap strategic cable systems with Comcast and expand an agreement with Microsoft for software used in cable-TV set-top boxes.
Theoretically AT&T could exchange some of Lenfest's cable systems with Comcast, expanding Comcast's operations surrounding Philadelphia and in Pennsylvania.
''Comcast might try to do a deal rationalizing the market,'' said Rick Michaels, chairman of media and entertainment brokerage Communications Equity Associates, saying he believed Comcast will have a difficult time topping AT&T's offer.
''Maybe some trades could happen out of that.''
Lenfest Addition
AT&T said the Lenfest acquisition will add to cash flow in the first year. Last year, Lenfest had revenue of $470.4 million and a net loss of $53.6 million. Its total debt was $1.3 billion at the end of March. Lenfest employs 1,988 workers. It also owns a 29 percent interest in Videopole, a French cable-TV operator with 130,000 customers.
AT&T is paying $2,900 per customer for Lenfest. That compares to $4,700 per subscriber for MediaOne and $2,700 per customer at Tele-Communications Inc., the No. 2 cable-TV operator that AT&T bought in March for $59.4 billion.
The purchase of TCI gave AT&T 10.7 million cable customers and access to 17.9 million homes. The acquisition of Lenfest, which owns or has interests in systems passing in front of more than 1.9 million homes, will make AT&T the largest U.S. cable operator, surpassing Time-Warner Inc., which has 12 million customers.
That lead will be extended if it is successful with the MediaOne acquisition, which will give it another 5 million customers. Its systems would pass by more than 27.5 million U.S. homes, or more than a quarter of U.S. residences.
Armstrong has said the company could sign up 30 percent of the available customers in its market for local, Internet access and cable services within five years. There you go plug in the number guys.
Kagan said he expects AT&T will be making more cable acquisitions since the company wants to get as much access to U.S. homes as it can. It has 70 million long-distance customers.
''AT&T is not buying cable companies to get into the cable business. AT&T is buying cable companies to have a pathway into our homes.''
Still, AT&T has a long way to go to prove its bets on cable will pay off, analysts said. AT&T has to invest billions of dollars to upgrade cable-TV network to provide phone services. It also has to ensure the technology works. Providing phone services over cable network has never been done on a widespread basis before, analysts said.
AT&T is trying to complete its telephone joint-venture negotiations with Time Warner. The company said purchasing MediaOne, which owns 25 percent of Time Warner's cable systems, would make its relationship stronger. |
