AT&Ts MediaOne Buyout Could Delay Telephony Deals

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AT&T Corp.'s pending merger with MediaOne
Group Inc. may end up pushing back the telecommunications giant's timetable to
close telephony deals into next year.

But AT&T spokesman Mark Siegel stressed that
this didn't mean the long-distance company's plans for cable telephony were on
hold.

"We said when we announced the Time Warner
[Inc.] agreement that we would start selling [service] to paying customers in
2000," Siegel said. "We are on schedule to do that. The technicalities
of completing the financial terms have to take into account the ownership
position MediaOne has in Time Warner [Entertainment]."

While Siegel added that the Time Warner
negotiations are moving forward, he conceded that the deal will most likely not
be finalized by the second half of this year -- the target date for closing when
the agreement was announced in February.

"It probably will take a while longer to
work out the deal with Time Warner -- to put the finishing touches on the
financial terms," he said.

A delay in the Time Warner agreement would likely
affect future telephony deals -- including one with Philadelphia-based MSO
Comcast Corp. -- because the Time Warner pact was expected to serve as a
benchmark.

Comcast, which was outbid for MediaOne by
AT&T, gets "most-favored" terms in its telephony deal with
AT&T. But before AT&T can even begin negotiating with Comcast, it must
close a telephony deal with Time Warner and another unaffiliated large cable
operator.

MediaOne owns 25 percent of TWE, the partnership
with Time Warner that includes most of Time Warner Cable's operations, the
Warner Bros. studio and premium networks Home Box Office and Cinemax. MediaOne
also owns part of high-speed cable-modem service Road Runner.

Time Warner and AT&T signed a telephony
agreement in February that was expected at the time to close by the second half
of the year. AT&T and Time Warner are to form a joint venture 77.5
percent-owned by AT&T and 22.5 percent-owned by Time Warner.

AT&T would pay about $300 million -- $15 per
home passed -- for exclusive rights to provide telephony services over Time
Warner's network for 20 years. In addition, AT&T would pay Time Warner a
monthly fee of $1.50 per telephony subscriber -- scaling up to $6 per month over
six years -- as the service rolls out.

Separately last week, AT&T, which held its
annual shareholders' meeting in Houston, said it would lay off about 2,500
workers at its network and operations units by the end of the year. The staff
cuts are part of an effort, announced with the MediaOne deal, to trim $2 billion
in costs at the company.

AT&T also said it has begun bundling voice
and video to paying customers in Fremont, Calif., and it plans to begin tests of
the service in Dallas and Salt Lake City.

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