Time Warner Cable IPO in Danger?


The expected initial public offering of AOL Time Warner Inc.'s cable assets
seemed to be in jeopardy after the company disclosed in a securities filing that
it might have to restate as much as $400 million in revenue stemming from an
earlier advertising agreement with Bertelsmann AG.

AOL Time Warner had expected to attempt the IPO for its Time Warner Cable
unit this summer. But with another Securities and Exchange Commission
investigation hanging over the parent company, some industry observers said a
cable IPO may have to be postponed.

According to AOL Time Warner's 10-K annual report, filed Monday, the SEC is
looking into a transaction through which Bertelsmann purchased about $400
million in advertising from the America Online Inc. unit.

That transaction took place at the same time AOL paid the German media giant
$6.7 billion for Bertelsmann's interest in AOL Europe.

According to the document, the SEC contended that at least some of that $400
million payment should have been accounted for as a reduction in the purchase
price, rather than as revenue.

In the filing, AOL said it and its auditors believed the transactions had
been correctly accounted for, and it would continue to cooperate with the

One saving grace for the Time Warner Cable IPO could be the argument that the
cable division itself is not being investigated.

Some securities analysts said they expected a delay to the IPO not because of
the investigation, but due to the expected poor performance of AOL Time Warner
as a whole.

In its fourth-quarter conference call with analysts, AOL Time Warner CEO
Richard Parsons said growth in the cable division would be in the
high-single-digits to low-double-digits in 2003, "which is slower than cable's
recent history."

That, several analysts said, was an indication that the IPO would be