AOL TW to Write Off $54bn

26 March 2002

In its annual filing with the Securities and Exchange Commission, AOL Time Warner has revealed that it will take a first-quarter charge of $54 billion (£38m; €62bn) to reflect the declining value of the company since the $181bn merger of America Online and Time Warner in 2000.

The charge – towards the upper end of the $40bn–$60bn guidance given by the media mammoth in January [WAMN: 08-Jan-02] – is one of the largest ever in American corporate history. To put it in perspective, the write-off is equivalent to the gross national income of countries such as New Zealand and Hungary.

The filing also revealed that AOL TW is in talks with the Newhouse family, whose company is involved in a partnership with the media giant which provides cable services to around 7 million of AOL TW’s 12.8m cable subscribers.

According to the report, the Newhouses could leave the alliance as early as Sunday, in which eventuality they would receive one-third of the partnership’s assets, taking around 2.3m subscribers from AOL TW.

The media group is negotiating with the family to prevent such a loss, and may buy the Newhouses’ minority stake in the Road Runner internet unit to help keep the partnership going.

Also disclosed by the filing are attempts by cable pioneer John Malone to gain voting rights in the group. Malone’s Liberty Media, which owns 4% of AOL TW, has asked the Federal Trade Commission to reverse a consent decree forbidding it from holding full voting stock or owning more than 9.2%.

If Malone’s bid is successful, he may force his way onto the media giant’s board.

Data sourced from: New York Times; additional content by WARC staff