AT&T Deals Seen as Prelims to Cable Move

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AT&T Corp. added to its war chest just before Christmas
with another asset sale, agreeing to sell its customer-care subsidiary to Cincinnati Bell
Inc. for $625 million in cash.

The deal follows AT&T's agreement to sell its
Universal Card Services credit-card unit to Citibank, in a $3.5 billion deal announced
Dec. 18, and its decision to sell back its DirecTv Inc. stake to Hughes Electronics Corp.
for $161.8 million, also announced last month. The DirecTv deal cleared the way for
possible alliances between AT&T and cable companies, and it freed the direct-
broadcast satellite provider to strike resale deals with local phone companies (like the
existing arrangement between DirecTv and Cincinnati Bell).

The signs keep pointing more and more toward AT&T
making deals with one or more cable operators, possibly as soon as next month. Brian
Adamik, who follows AT&T for The Yankee Group in Cambridge, Mass., expects to see
several layers to a deal, including the acquisition of MSO-controlled Teleport
Communications Group, a competitive local-exchange carrier that would give AT&T access
to business customers.

'I think that the delays [in announcing a deal] are
symptomatic of the very staged type of announcement that they have planned,' Adamik
said. 'I think that it is very likely that [AT&T] will buy Teleport. And I think
that it's very likely that they do a deal with cable for residential access. The
question is, what is that [residential] deal?'

AT&T could help to finance advanced cable boxes, which
would enable voice traffic over the Internet, or it could form a 'cable-modem
alliance' by buying into TCI-controlled At Home Corp., he said.

For Cincinnati Bell, the deal with AT&T highlighted the
company's continued diversification away from its local phone base. The deal will
roughly double in size the company's Matrixx Marketing Inc. unit. Matrixx and
Cincinnati Bell Information Services -- a billing-services provider that deals with many
cable operators -- are expected to account for about two-thirds of the company's
revenue by the end of 1998.

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