AOL Time Warner on Hold Till 2001

America Online Inc. and Time Warner Inc. are not likely to get U.S. regulatory approval of their proposed merger before year-end, as they requested, and may end up having to pay millions of dollars for duplicate paperwork.

AOL last week asked the Federal Communications Commission to approve the transaction before Jan. 1, to avoid the “substantial burden and expense” of filing separate financial documents. But with commissioners and staff scattered for the holidays, approval is unlikely before early January, FCC officials said.

Still, relative to the $97-billion combination, the extra work and estimated seven-figure extra cost is insignificant, analysts said.

By combining the world’s largest Internet service and the largest media company, AOL Time Warner plans to package more online news and entertainment and develop interactive TV, which lets viewers use their TV sets like computer screens to shop online.

“It was a very good lobbying tactic that didn’t work,” Scott Cleland, chief executive of Precursor Group, said of the bid to speed approval. The delay “is more hassle than material effect.”

The FCC is the last regulatory hurdle for the companies, which announced plans to combine nearly a year ago. Commissioners are reviewing a staff recommendation on the merger, focusing on whether the new AOL Time Warner would have an unfair advantage in developing and marketing instant messaging because of the popularity of AOL’s service.

“This is about significant administrative burdens, but it’s not material to our financial results,” said Tricia Primrose, an AOL spokeswoman. “We expect to close by the end of this year or the very early days of 2001.”

FCC approval this week would have helped the companies by reducing the number of state and local tax returns, Securities and Exchange Commission filings and audit and accounting reviews they must submit each quarter, the company said.

In addition, both companies might have been able to mask disappointments in the fourth quarter by reporting joint financial results, said Larry Haverty, analyst at State Street Research & Management in Boston.

Time Warner last week said its fourth-quarter results will be lower than forecast because of slowing sales of advertising on its cable television networks and weakness in its music and film businesses.

AOL said its estimates of fourth-quarter profit and financial goals for next year remain unchanged, though some analysts have forecast slower profit growth from declining ad sales on the Internet.

Shares of AOL fell 50 cents Thursday to close at $35.25 and have declined 52% since the merger was announced. Time Warner shares rose 10 cents to close at $53.60 and are down 17% since the announcement. Both trade on the New York Stock Exchange.