AT&T in Talks with AOL to Combine Cable TV Operations

25 July 2001

AT&T has reportedly entered talks with AOL Time Warner concerning a merger of the duo’s cable TV businesses.

Only last week, AT&T rejected a $40 billion offer from Comcast Corporation for its cable division, titled AT&T Broadband. Despite turning down the offer for not reflecting the “full value” of the unit, AT&T’s statement that it would “explore financial and strategic alternatives”, effectively put the business up for sale.

According to insiders, AOL TW entered talks with AT&T soon after Comcast made its offer a fortnight ago [WAMN: 09-Jul-01], with discussions focusing on a possible spin-off of AT&T Broadband and merger with AOL TW’s Time Warner Cable.

However, negotiations are still at a preliminary stage, and no formal proposal has been made. Any deal would face intense regulatory scrutiny – AT&T and AOL TW are the number one and number two US cable companies, respectively. Nevertheless, the talks could prompt higher bids from other prospective suitors.

AT&T Broadband saw Q2 revenues climb 14% year-on-year to $2.6bn, with cash-flow margins rising 5.1% to 23.4%. The unit also signed up 553,000 customers over the quarter to new services such as digital video and high-speed internet connections. This was down on Q1’s 700,000, a decline AT&T blamed on seasonal factors.

News sources: Wall Street Journal; New York Times