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AT&T meets AOL Time Warner
Telecoms giant explores its options...

By Suzanna Kerridge

Published: Wednesday 25 July 2001

AT&T has started negotiations with AOL Time Warner in an effort to fend off an unwanted take-over bid for its cable business.

According to reports, merger talks opened shortly after Comcast, AOL Time Warner's own cable division, made an unsuccessful $40bn stock-swap bid for AT&T Broadband.

However, AT&T said it was going to explore financial and strategic alternatives.

The Wall Street Journal said that Richard Parsons, AT&T's COO, is to meet with acquaintance C. Michael Armstrong, chairman and CEO of AT&T. Gerald Levin, CEO of AOL, has also met with representatives from the telecoms giant.

The report claims the talks are very informal, with no direct proposal on the table. However, a potential deal could involve Comcast buying AT&T Broadband but allowing AT&T shareholders to retain a 50 per cent stake.

In return, AT&T will relinquish its 25.5 per cent stake in the Time Warner partnership to AOL, but tight US monopoly regulations could pose a threat to AOL's plans to become a cable giant.

A potential solution could be for the broadband business to trade as a separate entity not beholden to AOL but with a fiduciary responsibility to its shareholders.

A person familiar with the issue said at least half the combined board will be directors representing AT&T shareholders.

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