With MediaOne Group Inc. seemingly locked up, AT&T
Corp. can turn its attention to completing a string of telephony joint-venture agreements
it has pending with other cable operators.
Experts said last week that telephony-affiliation deals
with other major MSOs were likely, arguing that operators would take a guaranteed return
for use of their plant, letting AT&T assume the risk of rolling out local phone
service in their markets.
For now, high on AT&T's list is completing its
telephony agreement with Time Warner Cable, which it put on hold while pursuing its $62
billion acquisition of MediaOne.
"With everything that's been going on, plus the
standstills that are in place, we really had to step back from completion of that joint
venture," AT&T chairman C. Michael Armstrong said.
Leo J. Hindery Jr., president of AT&T Broadband &
Internet Services, agreed that until the MediaOne deal was sealed, it was "not a
great use of time to continue to pursue the Time Warner thing."
Nevertheless, the deal will require some last-minute
tweaking to reflect the stake in Time Warner Entertainment that AT&T is acquiring
along with MediaOne, Hindery added.
Hindery, who has said that AT&T is not interested in
being in the programming business, did not elaborate.
However, sources believe AT&T may be willing to trade
its newly acquired TWE stake for ownership of certain Time Warner Cable systems in
strategic markets. In exchange, Time Warner would regain the interest in Warner Bros.
Studios and Home Box Office it originally sold to U S West Inc. in 1993.
Also shifting to the front burner will be the completion of
affiliation deals AT&T reached earlier with five smaller MSOs, which have not reached
the definitive-agreement stage yet.
"I think we're all in the same boat," said
an official with one of the five companies that have been awaiting the outcome of
AT&T's bid for MediaOne. "But we have an agreement and every intention of
Added an official at another of those MSOs: "We
don't have the details. It's more like a blueprint of a house. But we have an
agreement with AT&T, and we're not going to do [telephony] with anybody
Meanwhile, lurking in the wings is the possibility of two
major agreements to come.
Proof that more joint ventures are imminent came during
last week's press conference to announce that AT&T and Comcast Corp. reached an
agreement to avoid a costly bidding war for MediaOne. Comcast president Brian Roberts said
a definitive agreement would have to await expected telephony-affiliation deals between
AT&T and "two other large cable operators."
Presumably, that will allow Comcast to see what terms those
operators extract from AT&T, since its own agreement contains a
"most-favored-nation" provision guaranteeing it AT&T's best terms.
"Brian has the prerogative to change and accept those
conditions that we strike with other operators that suit his company's
interest," Hindery said.
Asked if deals might be in the works with Cablevision
Systems Corp. and Cox Communications Inc. -- two operators that have aggressively invaded
the telephone business -- Armstrong admitted he would be willing to look "at other
MSOs, be it Cox or Cablevision, where we could indeed go forward with telephony
The two companies in question reacted differently.
Cox -- which already offers residential phone service in
five states and business dialtone in two other markets -- insisted that it had only held
"casual" talks with AT&T. Cox, Comcast and MediaOne had been conducting
joint talks with AT&T in hopes of leveraging a unified position into the best possible
But by last week, the Atlanta-based MSO appeared ready to
go it alone.
"We've talked to them for a period of time,"
a Cox insider said, "but we have no plans for a telephone-affiliation
A Cablevision spokesman declined to comment on any talks.
But sources indicated that the Bethpage, N.Y.-based MSO, which is about 35 percent-owned
by AT&T, had informed analysts that the two sides launched preliminary talks on a
Ted Henderson, a cable analyst with Denver-based Janco
Partners, said it might be more prudent for operators to take AT&T's affiliation
deal and concentrate on the opportunity to introduce lucrative high-speed-data offerings.
"It comes down to this: It's still AT&T
knocking on your door. You can take the return on your plant, or risk rolling out the
service yourself," Henderson said. "Or you can focus on the real challenges that
face you in the data business. In my opinion, it's a four-cushion shot, compared with
a seven-cushion shot."