In Trusts, These MSOs Trust

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AT&T Broadband and Comcast Corp. want to place their interest in Time Warner Entertainment L.P. into a pair of trusts for eventual sale, but regulators must decide whether the trust mechanisms would promote the public interest.

When merger partners AT&T and Comcast proposed the trusts on Aug. 8, the Federal Communications Commission suspended its 180-day review of the largest cable merger ever at day 134 to solicit public comment.

Those comments are due Aug. 30, at which time the FCC is expected to resume the 180-day merger review clock.

As proposed by the cable companies, AT&T and Comcast would appoint a trustee who would have at least five years — perhaps even seven — to sell the TWE stake.

The restructuring of TWE announced last week is expected to occur after the close of the merger that will yield AT&T Comcast Corp. As a result, the trustee is expected to receive AT&T Comcast's $3.6 billion in cash and stock, as well as arrange for the sale of AT&T Comcast's 21 percent economic interest in Time Warner Cable Inc., the new cable company AOL Time Warner plans to create.

An FCC source said the TWE restructuring did not appear to complicate review of the trusts. The source said the request for five years to divest was unusual, but not unprecedented.

Because AT&T and Comcast do not compete for cable customers, the proposed merger was never expected to cross antitrust laws or cause great anxiety at the FCC.

"The TWE deal takes a relatively smooth and easy regulatory path and turns it into a relatively easier and smoother regulatory path — which is simply to say that the TWE stake was always going to be resolved by having it handled by a trustee," said Legg Mason Equity Research media and telecom analyst Blair Levin.