Archive for Friday, April 23, 1999

T MAKES $58 BILLION BID FOR MEDIAONE

April 23, 1999

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New York (ap) -- AT&T; Corp. offered $58 billion Thursday for MediaOne, the nation's fourth-largest cable-television company, hoping to thwart a merger agreement that Comcast Corp. and MediaOne reached two months ago.

AT&T; said its rival bid, a combination of cash and stock, exceeded the value of the Comcast deal by 17 percent. The offer is 26 percent above MediaOne's current market value, AT&T; said.

An AT&T; deal would make the nation's largest telecommunications company also its No. 1 cable TV company. AT&T;, which completed its acquisition of cable company Tele-Communications Inc. last month, now has 12.5 million cable subscribers. MediaOne has 5 million. Time Warner, currently the largest, has 12.6 million subscribers.

AT&T; is in the market for cable TV companies because it plans to use cables to deliver a combination of phone service, high-speed Internet access and interactive entertainment to millions of U.S. homes. Other cable companies have been merging to make them more competitive as technological innovations allow for such new services.

While AT&T; is the nation's largest long-distance company, it has stumbled using more conventional methods to break into the lucrative local phone market.

Cathy Fowler, a spokeswoman for Denver-based MediaOne, said the AT&T; proposal is under review and "We have nothing to add at this time."

AT&T; chairman C. Michael Armstrong said in a statement, "Americans have been waiting for someone to run another wire to their homes to give them a choice in local phone service and deliver the advanced services they expect in a competitive market."

The deal would give more U.S. consumers a choice among local phone companies, he said. Most of the country is now dominated by the regional phone companies called Baby Bells, which have resisted efforts to open their businesses to competition.

AT&T; said the deal would save it $175 million to $200 million in costs. While there will be some work force reductions, AT&T; officials wouldn't specify how extensive they will be.

The company acknowledged the cost of the deal would cut its profits by about 30 cents per share in the first year after completion, but it said profits would rise after that.

AT&T; has structured the cash-and-stock deal so that if AT&T;'s share price drops as much as 10 percent, the amount paid MediaOne shareholders would not decline.

AT&T; is also assuming $4.5 billion in MediaOne debt and other obligations.

AT&T; announced its rival bid after the close of financial markets Thursday. The company detailed its offer in a letter to MediaOne chief executive Charles M. Lillis.

MediaOne is a spin-off of the U S West regional phone company, which decided in late 1997 to get out of the cable TV business.

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