AT&T SHEDS MORE CABLE SYSTEMS, WEIGHS SELLING TWE STAKE
Disposing of more assets, AT&T agreed to sell cable systems in several more states to Charter Communications and considered offering its 25.5% stake in Time Warner Entertainment (TWE) to public investors. AT&T, which has already shaved its debt load to $46 billion from high of $65 billion last year, aims to raise as much as $12 billion through 2 separate actions. Analysts still expect company to take further steps to pare down its debt, including spinoff of its Liberty Media programming unit and sales of its stakes in Comcast, Cablevision Systems and European wireless operations that it inherited from MediaOne.
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Agreement with Charter calls for AT&T to sell cable systems in St. Louis area, Reno region and parts of Ala. with total of 574,000 basic cable subscribers for $1.79 billion. AT&T will receive slightly more than $1 billion cash and up to $500 million in Charter common stock for its properties. AT&T will also gain 2 Fla. cable systems in Miami Beach and Sebastian which, with total of 62,000 customers, are valued at $249 million. Companies said they expect deal to close in 2nd or 3rd quarter.
As he did with Mediacom pact day earlier (CD Feb 28 p2), AT&T Broadband Pres. Dan Somers said Charter deal will “further our strategy of clustering in larger markets.” He noted that 2 south Fla. cable systems “will complement our current cluster there quite well.” AT&T has been seeking to shed its “non-strategic” systems in other areas to concentrate on large cable markets where it dominates, such as Boston, Atlanta, Chicago, Denver, San Francisco, Seattle and south Fla.
Charter executives, who scored net gain of 512,000 subscribers in transaction, said deal will give them nearly total control of their St. Louis hq market with 530,000 customers. As result, they aim to explore creating regional cable sports channel and regional news channel in St. Louis area, similar to Comcast in Philadelphia and Cablevision in N.Y.C. Charter officials said they will also become dominant cable provider in Birmingham area with 175,000 subscribers and sole provider in Reno market with 150,000 customers. In addition, they said, they will pick up 104,000 digital cable and 14,000 high-speed data subscribers. “All these systems are top-notch, high-quality properties,” said Charter Pres. Jerry Kent, who stressed that St. Louis systems will become “our flagship operations.”
As for its 25.5% TWE stake, AT&T announced late Wed. that it had formally requested right to convert limited partnership into corporation and create equity securities with voting rights for investors, even though market conditions for such sale are now considered unfavorable. AT&T filed registration with SEC under terms of TWE partnership agreement that it inherited from MediaOne as part of its effort to heighten pressure on AOL Time Warner. AT&T has reportedly sought to sell its minority interest back to AOL Time Warner for at least $9-$10 billion but sides haven’t been able to agree on terms for months. AT&T said it plans to continue its discussions with AOL Time Warner to reach negotiated settlement and both sides have agreed to suspend action on TWE registration process until March 15.