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Home » Hacking News » AOL buys cable. Whats next? Your old socks.

AOL buys cable. Whats next? Your old socks.

by Majik on September 11th, 2001 AOL Time Warner Inc. is stepping up efforts to acquire a major stake in AT&T Corp.'s cable system, offering a deal that would give the media company control of the combined operations, according to sources familiar with the proposal.


Under the terms being discussed, New York-based AOL Time Warner would acquire up to 49 percent of AT&T Broadband, the nation's largest cable provider with about 14 million subscribers, the sources said. The combined cable operations would be spun off into a publicly traded unit, but AOL Time Warner would run the operation, sources said.





AT&T's cable system would be combined with AOL Time Warner's No. 2-ranked cable network, which has nearly 13 million subscribers, creating a system with about 27 million subscribers and giving it control over about a third of the U.S. cable market. The merged cable system, which would dwarf its competitors and potentially spur other cable combinations, would likely draw close scrutiny from federal regulators.





Eight months after its own hard-fought merger, AOL Time Warner already controls about half the Internet-access market in the United States and big swaths of the publishing, movie and music businesses. Adding AT&T's cable assets to its stable would allow AOL Time Warner to not only reach a broader audience, but to feed consumers its vast content, including HBO and CNN, and Internet services.





Officials for both companies declined to comment yesterday. Sources said that talks remain fluid as New York-based AT&T contemplates other potential bids. "Nothing is imminent," a source familiar with the situation said.





AT&T's board of directors is expected to meet at the end of next week to consider its bids. In addition to AOL Time Warner, sources said another suitor has come forward with a bid for the cable unit. The name of the potential bidder was not disclosed.





In July, AT&T rejected an unsolicited stock-swap offer now valued at about $41 billion from Comcast Corp., a Philadelphia-based cable operator with about 9 million subscribers. Other potential suitors are believed to include Cox Communications Inc., Charter Communications Inc., Walt Disney Co. and Microsoft Corp.





Sources cautioned that even as talks heat up between AOL Time Warner and AT&T that it is in the interests of phone company and those associated with it to drum up as much interest in the cable unit as possible in an attempt to receive the highest price. Last week John Malone, chairman of Liberty Media Corp., a major shareholder in AOL Time Warner with close ties to AT&T, hinted at the cable bid during a Liberty Media investors conference.





Talks between AOL Time Warner and AT&T first came to light in July, two weeks after Comcast made its unsolicited bid for the phone company's cable systems. AT&T had planned to spin off its cable operations, but decided to first explore other offers after Comcast's bid. Wall Street analysts said it would be in AT&T's interest to attract other suitors, if for nothing more than to entice Comcast to raise its offer.





Should AOL Time Warner's bid prevail, the creation of a separate cable company combining the assets of both companies would allow AT&T to own a majority of the joint company, which would protect its shareholders from a big tax bill. AT&T owns 25.5 percent of Time Warner Entertainment, the AOL Time Warner division that holds its cable operations.





Shares in AOL Time Warner and AT&T are down substantially for the year. AOL Time Warner closed Friday at $32.28 a share, down 42 percent since January. AT&T closed at $17.70 a share, down 23 percent for the year. Both stocks trade on the New York Stock Exchange.


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