AT&T; to Pay Dearly for Control of Internet Provider @Home

AT&T; Corp., the No. 1 U.S. cable-television company, said Cox Communications Inc. and Comcast Corp. agreed to accept about $2.9 billion of AT&T; stock for their stakes in high-speed Internet service provider @Home Corp.

The number of shares AT&T; must issue will be determined by its average closing price 15 days before and after Friday, AT&T; spokeswoman Eileen Connolly said. Cox and Comcast each own about 30 million shares of @Home.

After buying out its @Home partners, AT&T; will have a 38% equity stake. Comcast and Cox each had veto power before, but now AT&T; will have absolute control over all voting stock.

On March 29, AT&T; gave Comcast and Cox the option to sell their @Home stakes to AT&T; for at least $48 a share in cash or stock, but not more than $3 billion total, from Jan. 1, 2001, to June 4, 2002.

At the time, analysts questioned the wisdom of the deal, since the @Home stock was trending downward as a result of the threat of an “open access” movement that could bring a wave of competition for the high-speed Internet service. Shares of @Home, the largest U.S. provider of Internet service over cable TV lines, have fallen 80% since the agreement.

Yet AT&T; viewed the buyout as the only way to resolve persisting strategic conflicts among the board about the operation.

The deal, however, will cost AT&T; heavily. Comcast and Cox together stand to gain about $2.9 billion for their @Home stakes that were worth about $523 million on Friday. On Friday @Home closed up $1 a share to $8.72 on Nasdaq.

AT&T; shares rose $1.19 to close at $24.44 on the NYSE. They had fallen 61% since the March announcement. Comcast Special Class A shares rose 86 cents to $44.31 on Nasdaq. Cox fell 12 cents to $48.19 on the NYSE.