AT&T Takes Programming Option

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WASHINGTON -AT&T Corp. plans to divest various programming interests next year to comply with MediaOne Group Inc. merger conditions, the company said Dec. 15 in a letter to the Federal Communications Commission.

If AT&T finds it cannot restructure itself as planned, the company said it would divest its 25 percent interest in Time Warner Entertainment, a partnership with Time Warner Inc. that includes at least 9.7 million cable subscribers, Home Box Office, and the Warner Bros. film studio.

AT&T has until May 19, 2001, to carry out its restructuring under the FCC's MediaOne merger order adopted in June. AT&T is the country's largest MSO, with 16 million subscribers.

By divesting its programming interests, AT&T would no longer own cable networks that sell programming to TWE. Because of that relationship, TWE's cable subscribers were added to AT&T's total subscriber count.

"We are diligently following through on what we said we'd do," James Cicconi, AT&T's general counsel and executive vice president, said in a prepared statement.

In June, the FCC required AT&T to sell cable subscribers or programming interests to comply with cable-ownership rules. Under those rules, which limit one MSO to 30 percent of the overall U.S. pay-TV market, AT&T had about 41 percent of the market.

Last month, AT&T took the first step toward meeting the merger conditions by announcing the spin-off of Liberty Media Group, contingent upon a favorable tax ruling from the Internal Revenue Service.

Because the Liberty deal was insufficient for full compliance with the FCC's order, AT&T needed to take additional steps on the programming front.

AT&T owns at least a dozen cable networks acquired with MediaOne, and owns 30 percent of Cablevision Systems Corp., parent of Rainbow Media Holdings Inc. Rainbow owns Bravo, the Independent Film Channel and American Movie Classics, which sell their services to TWE.

In the FCC letter, AT&T said it would spin off Liberty and also make "non-attributable its interests in other entities from which (TWE) purchases video programming."

AT&T can make its various programming interests non-attributable by selling some or all of the networks, by creating a trust that holds the networks or by converting voting stock to non-voting stock.

An AT&T spokesman said the company would not reveal its method for attaining non-attribution.

AT&T also said it would "take steps to ensure that Rainbow Media Sports Holdings Inc., In Demand, and the MediaOne-affiliated video programmers that are carried on TWE cable systems are no longer attributable to AT&T."

AT&T said it would notify the FCC by March 20, 2001 on the creation of an irrevocable trust to sell to dispose of its TWE interest, if that step becomes necessary.

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