AOL, AT&T unwind TWE venture

By SUSAN RUSH
From CED Broadband Direct, August 21, 2002

Well, it is official, AOL Time Warner Inc. will buy AT&T Corp.'s stake in Time Warner Entertainment. The deal is valued at roughly $9 billion.

The deal calls for AOL to fork over to AT&T $2.1 billion in cash, $1.5 billion in AOL Time Warner common stock and a 21 percent equity stake in the newly created Time Warner Cable Inc. For AT&T's part, the company will give up its 27.6 percent stake in TWE, giving AOL complete control of content businesses, including HBO, Warner Bros. and stakes in Comedy Central, Court TV and The WB Network.

The venture originally was created in 1992 to reduce debt, but has been considered a thorn in each of the company's side for some time now, after AOL and AT&T failed, time and again, to reach an agreement on how to unwind the venture.

While negotiations have been on again, off again, AT&T Corp. has been trying to complete the merger of its broadband unit with Comcast Corp. Monetizing the TWE assets has been a major priority, according to Comcast President Brian Roberts. The deal will enable the newly created AT&T Comcast, once the merger is complete, to have a stronger balance sheet from the onset, said Roberts.

As part of the deal, the parties have inked a three-year, non-exclusive agreement to deliver AOL High-Speed Broadband service to 10 million AT&T Comcast homes. Boston, Indianapolis, Nashville and Seattle will be the first markets to gain access to the service.