August Spin-Off Will Free Liberty

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AT&T Corp. has set Aug. 10 as the spin-off date for its Liberty Media Group Inc. tracking stock, ending Ma Bell's two-year relationship with Liberty chairman John Malone.

The spin-off, according to an AT&T press release, will occur at 9 a.m. that day. AT&T's board of directors voted June 18 to redeem each outstanding share of Liberty Media class A and class B tracking stock for one share of Liberty Media Corp. series A and series B common stock. Only shareholders of record as of June 14 will be able to redeem shares.

Following the redemption, Liberty Media Corp. will become an independent, publicly traded company listed on the New York Stock Exchange under the symbols "LMC.A" and "LMC.B."

AT&T acquired Liberty in its $48 billion acquisition of Tele-Communications Inc. in March 1999. The spin-off of Liberty is part of an overall restructuring of AT&T, which includes a previously announced plan to split the telcommunications giant into four separate parts — broadband, wireless, consumer services and business services.

The spin-off will end what at times has been a contentious relationship between AT&T and Malone, who has aired his displeasure regarding the company's depressed stock price in the national press. Malone had called for a Liberty spin-off shortly after the TCI merger was completed in 1999, but it wasn't until AT&T purchased another cable company — MediaOne Group Inc. — that the possibility of a complete separation with Liberty became a reality.

The divestiture of Liberty was one of several conditions the Federal Communications Commission imposed on AT&T when it approved the MediaOne merger.

Last November, AT&T won a favorable ruling on a tax-free Liberty spin-off from the Internal Revenue Service.

AT&T reiterated that following the Liberty spin-off, Malone will resign from AT&T's board of directors, although he will remain one of that company's largest individual shareholders.

In a statement, AT&T said the spin-off would allow Liberty to raise capital on its own, use its stock as a deal currency and help the public markets to better value the company. It also should eliminate any regulatory and competitive conflicts of interest between AT&T and Liberty.

In a research note, UBS Warburg media analyst Christopher Dixon wrote that the spin-off would free Malone and Liberty to do what they do best — make deals.

Dixon added that although Liberty has made a number of bad investments in the past few years, including deals involving Priceline.com and ICG Communications Inc., he attributed that more to a belief that the last year's capital markets would last longer and allow early-stage ventures to access a second round of financing.

"It didn't happen, but that in no way diminishes the fundamental tenet that the shift from analog to digital would create enormous opportunities across delivery platforms designed to distribute video, voice and data," Dixon wrote.

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