Time Warner trying to break from RoadRunner ASAP.
--
America Online, AT&T Talking Partnership, Case
Says (Update2)
3/9/00 1:31:00 PM
Source: Bloomberg News
(Updates with closing stock prices, adds AT&T comment in second
paragraph.)
New York, March 9 (Bloomberg) -- America Online Inc., which is buying
Time Warner Inc. for $155 billion, and AT&T Corp. could jump start
high-speed Internet access in the U.S. if the two form a partnership to
jointly sell each other's services.
America Online is discussing an alliance
with AT&T, AOL Chairman Steve Case
said late yesterday. AT&T said today
nothing is imminent with America Online,
and the company intends to honor its
exclusive contract with No. 1 cable
Internet-access provider Excite At Home
Corp., which ends in 2002.
America Online agreed to buy Time
Warner in January to gain access to its
content, including Time and other
magazines and television networks such
as CNN, and its fast, cable-Internet lines.
The combined company has pledged to
open its cable lines to rival
Internet-access providers. AT&T and other
companies with cable-Internet networks
will do so, and America Online is
negotiating with cable companies for
access to their lines, Case said.
'AOL could say, we want to provide
high-speed Internet over your cable
systems as fast as possible,' said Bruce
Kasrel, an analyst at Forrester Research,
a Cambridge, Massachusetts-based
technology research company. There are 'up to 25 million U.S. homes
passed by high-speed Internet cable. AOL could get 15 million to 20
million through Time Warner and AT&T.'
America Online and AT&T, which will become the largest U.S. cable-TV
operator after it acquires MediaOne Group Inc. later this year, could work
together several ways, although Case declined to be more specific.
A Broader Opportunity
Shares of America Online rose 5 3/4, or 10 percent, to 60 7/8 in trading
on the New York Stock Exchange. Time Warner rose 7 7/16, or 9.4
percent, to 86 3/4. AT&T shares fell 5/16 to 52 5/8.
America Online's flagship service has more than 21 million subscribers.
Excite At Home Corp., the biggest high-speed cable- Internet service,
had 1.15 million subscribers at the end of 1999.
'Just as Apple learned when they controlled things too tightly with the
Mac in the 1980s, they missed a broader opportunity,' Case said in a
Bloomberg News interview in New York yesterday. 'Other cable
companies want to get on the bandwagon, and so do other ISPs
(Internet-service providers).'
America Online and AT&T could also be discussing a joint marketing
agreement that would extend an alliance announced yesterday between
Time Warner and the phone company. AT&T, the largest U.S.
long-distance telephone company, and Time Warner will jointly sell their
services to Time Warner's 600,000 cable- television customers in
Syracuse and Albany, New York.
What Makes Sense
'Now AOL might want to say, 'Let's put together a more cohesive
package and create a new brand: the AOL-Time Warner-AT&T bundle
with one email address,' Kasrel said.
America Online will continue to offer content from many media sources
and won't limit itself Time Warner's, he said. America Online has signed
distribution deals with media companies, rather than creating its own
content.
'HBO is the leading movie channel, but it wouldn't be if it only carried
Time Warner movies,' Case said. 'We'll do what makes sense for us and
consumers.'
America Online's stock will rise, Case said, as investors understand how
the two companies will help each other.
'We should have a premium compared to other companies,' he said. 'Our
sense is, the stock will hit a floor. The stock will do very well and indeed
hit new highs.'
Bertelsmann
Combining the companies will allow America Online to increase revenue
through more sales of new devices such as AOL TV and
Internet-connected cell phones, Case said. For example, consumers will
be able to order music through America Online's services. AOL TV will
make Time Warner's content interactive by, for example, allowing people
to watch whatever segment of CNN they want.
America Online is talking to Bertelsmann AG, a Time Warner media rival
with which AOL operates Australian and European joint ventures, about
'how to work together in the future,' Case said. Bertelsmann said last
month that it might sell all or part of its 50 percent stake in its European
joint venture with America Online.
'We're confident we'll have a good relationship with them,' he said. The
relationship 'is likely to be different than in the past, but it's too premature
to comment on that.'
Time Warner is seeking to end its exclusive Road Runner contract before
its termination at the end of 2001 so that it can open up the cable
network earlier, Case said. Road Runner is a joint venture of Time
Warner, MediaOne Group Inc., Compaq Computer Corp., Microsoft Corp.
and the Newhouse family's closely held Advance Publications Inc.
'The worst case is, it's 2001, and the best case is, a lot sooner,' Case
said. He declined to comment on what will happen to Road Runner after
America Online completes the Time Warner purchase.
The company isn't expecting any government roadblocks to getting the
acquisition completed, he said.
AT&T and Time Warner, both based in New York, said yesterday they've
agreed to sell discounted packages of telephone and cable- TV service
jointly to 600,000 Time Warner customers in Syracuse and Albany, New
York. AT&T said AOL's purchase of Time Warner won't affect the
joint-marketing agreement in upstate New York. |
