AT&T; in Talks to Explore Links to Cable, Internet Firms
AT&T; Corp., the nation’s largest long-distance carrier, is in wide-ranging talks about possible alliances with the nation’s top cable operators, led by Tele-Communications Inc., according to executives in Anaheim this week for the annual Western Cable show.
Stressing that the talks are preliminary and exploratory, sources at one large cable operator said the long-distance carrier had put on the table a proposal to invest $1.3 billion into At Home, a high-speed Internet service owned by a group of cable companies.
Another possibility under discussion is an investment or an outright purchase by AT&T; in TCG, formerly known as Teleport Communications Group, a $10-billion company started by cable operators Cox Communications, TCI and Comcast Corp., that owns fiber-optic local loops that connect corporations.
That deal, which would be AT&T;’s first big move into the local phone business since the breakup of the Ma Bell monopoly 13 years ago, is a strong sign of the company’s strategy under new Chief Executive C. Michael Armstrong.
The talks are taking place amid a swirl of deal-making and ebullience for the cable industry. With stocks at record highs after a four-year retrenchment and new conviction on Wall Street and in Silicon Valley that cable may be the most efficient pipeline into the home for entertainment and information, the industry has been meeting with companies such as Microsoft Corp. and AT&T;, eager to strike alliances,
One source said the cable owners of At Home, which include TCI, Comcast, Cox and Cablevision Systems Corp., are likely to reject the AT&T; offer because they worry the agreement would limit them from expanding the service, which is provided through their cable lines, in the 60 million homes outside their territories.
AT&T;, which has been struggling in the more competitive world of telecommunications deregulation, sees high-speed Internet services as a way to build loyalty with its customers. The phone company’s online service, Worldnet, would be included in the deal.
John Malone, chairman of TCI and the lead investor with a 40% stake in At Home, refused to comment on possible talks with AT&T.;
But he refuted speculation that TCI plans to sell TCG. “We love Teleport and would never sell it,” he said, adding, however, that the company would consider partnering in the asset in a way that could make it grow.
For AT&T;, involvement with TCG would give the long-distance carrier much needed local fiber-optics to compete with the Baby Bells or with the company formed by the proposed merger of MCI Communications Corp. and WorldCom Inc.
AT&T; spokeswoman Ruthlyn Newell said the company never comments on speculation about mergers or acquisitions. Teleport spokesman Roger Cawley also refused to comment.
Nearly two-thirds of Teleport’s stock is held by three big cable television companies: Tele-Communications owns 28.5%, Cox owns 22.4%, and Comcast owns 14.7%.
TCG’s stock price has jumped $10 in the last week on speculation that it would be sold, but the company’s shares fell $2.50 to $57.63 on Nasdaq on Thursday. At Home jumped $2.31 to $25.88 on Nasdaq on a report in USA Today that the investment was in the final stages of negotiations. AT&T; fell 69 cents to $57.13 on the NYSE.
But cable sources vigorously denied that any deal had been struck. They said there were several issues to discuss, such as how the service might be branded and marketed. While the long-distance phone company could lend its household name to the service, the cable companies wonder whether that would minimize their own efforts to improve their own brands.
The cable owners invested in At Home were reviewing a 160-page document received on Thursday from the phone company and were scheduled to continue talks over the weekend.
Microsoft has also been interested in investing in At Home and one partner said the company could still participate in the venture, even if a deal were struck with AT&T.;
*
This report includes information from Times wire services.
