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Technology Stocks : AUTOHOME, Inc -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (9432)	5/13/1999 8:02:00 AM
From: John Carragher	Respond to of 29970

May 13, 1999 At Home, Road Runner Deal Is Considered a Long Shot By LESLIE CAULEY and REBECCA BLUMENSTEIN Staff Reporters of THE WALL STREET JOURNAL Shares of At Home Corp., the high-speed data service controlled by AT&T Corp. surged on the news that the long-distance company was buying MediaOne Group Inc. The spurt reflected Wall Street's expectation that At Home would finally merge with Road Runner, the high-speed rival controlled by MediaOne and Time Warner Inc. Think again. Though the idea of a merger is getting an enthusiastic thumbs up on Wall Street and in Silicon Valley, people close to At Home and Road Runner actually consider that possibility to be a long shot. These people say the regulatory climate in Washington, where AT&T is seen as an ever-expanding cable behemoth dominating the broadband market, and Time Warner's historical resistance to the idea are two big reasons a merger isn't likely soon. Last week, C. Michael Armstrong, AT&T's chairman, declined to speculate on the future of Road Runner. With MediaOne, AT&T would have about 34% ownership of Road Runner, and share management control 50-50 with Time Warner. Mr. Armstrong noted that AT&T also will maintain its controlling stake in At Home. People close to the situation emphasize that it is premature to speculate on the ultimate outcome of those assets though it is conceivable, for example, that AT&T could trade some of these very holdings as part of future deals. People close to At Home say the company is eager to merge with Road Runner in order to cut costs and increase national visibility. That said, it won't be up to At Home to make that decision because of the increasingly complex web of players and issues involved. Meanwhile, AT&T's plan to buy MediaOne for $54 billion in cash and stock won't be finalized soon. The deal isn't scheduled to close until the first quarter of 2000, but some observers think it could take 18 months or longer because of regulatory issues. Insiders say a merger of At Home and Road Runner in the meantime might further antagonize regulators, who have already signaled that they plan to give close scrutiny to the MediaOne transaction. The MediaOne deal, which follows AT&T's acquisition of cable-giant Tele-Communications Inc., will leave AT&T with access to more than 60% of U.S. cable homes. AT&T insists, however, that it will own connections to only about 25% of those homes. AT&T's plans also are expected to get extra regulatory scrutiny because of the involvement of Microsoft Corp. The software company recently agreed to invest $5 billion for a 3% stake in AT&T, and the promise of an expanded role in providing AT&T's broadband technology. Still, analysts say the perception that AT&T is lining up the pieces to take control of the emerging broadband market, whether real or not, could cause trouble for AT&T in Washington if it makes any moves related to At Home and Road Runner. "Talk about pushing more things together only raises more flags for regulators," says Tom Wolzien, a cable analyst with Sanford C. Bernstein & Co. For that reason, Mr. Wolzien says he "wouldn't be surprised to see the At Home-Road Runner merger on the back burner until everything else is resolved." Meanwhile, some rivals have already expressed worry over AT&T's everexpanding cable empire. Though At Home and Road Runner don't compete head-on, a merger would probably be used as fodder by rivals to fan the flames in Washington. So far, federal regulators have sided with cable companies. But a merger of At Home and Road Runner would give rivals "an excuse to start screaming again," says Jessica Reif, an analyst with Merrill Lynch & Co. Then there is the Time Warner issue. Time Warner's Chairman Gerald Levin passed on an invitation to get in on the ground floor of At Home when it was being put together a few years ago. He still believes Road Runner's closely held financial structure makes more sense for the entertainment company, which has long viewed Road Runner as a showcase for Time Warner programming, say people familiar with Mr. Levin's thinking. A Time Warner spokesman declined to comment. A proposed merger of Road Runner and At Home more than a year ago fell apart, in part, because of Mr. Levin's insistence that Time Warner programs get an exclusive arrangement with At Home's cable operators, people familiar with the matter say. Finally, it isn't clear that At Home's board would be eager to endorse a merger. At Home's board includes representatives of AT&T's cable rivals, including Cox Communications Inc. and Comcast Corp., which just had MediaOne snatched away by AT&T in a high-profile bidding war. Some of all this uncertainty is beginning to show. At Home's stock rose 13% in the days after AT&T's bid was announced though it has since fallen back slightly. It closed Wednesday at $158.1875, up $2.5625, on the Nasdaq Stock Market. --Kara Swisher Contributed to this article.