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AT&T, MediaOne Clear Antitrust Hurdle, Agree to Divest Some Assets

May 26, 2000|From Bloomberg News

WASHINGTON — AT&T Corp. won Justice Department approval to buy MediaOne Group Inc. for $53.5 billion after agreeing to divest some assets. The merger would create the nation's biggest cable-television company.

Under a settlement with the government, the companies agreed to shed Road Runner, the second-largest U.S. high-speed cable Internet service provider. Road Runner's owners include MediaOne, and AT&T has a controlling interest in rival Excite@Home Corp. Together they would control 75% of the high-speed cable Internet market.

"The merger as proposed would have had an anti-competitive impact on the broadband market," said Joel Klein, head of the Justice Department's Antitrust Division. "American consumers will be the ultimate beneficiaries."

The companies are awaiting Federal Communications Commission approval, which could come within days. Agency staff recommended that AT&T be forced to shed either Liberty Media Group Inc., its programming subsidiary, or its 25.5% stake in Time Warner Entertainment.

The staff fears that combined, AT&T-MediaOne would control too much of the cable programming market. AT&T and MediaOne will serve about 40% of households with cable-TV or satellite service, exceeding the FCC limit of 30%.

In the Internet market, Justice Department officials were concerned that allowing the companies to keep Road Runner and Excite@Home would threaten competition for high-speed Internet access using cable TV lines. Internet service over cable offers faster speeds than traditional dial-up service using phone lines.

Shares of AT&T fell 81 cents to $33.94 in New York Stock Exchange, and MediaOne rose $1.25 to $67 also on the NYSE. Justice announced its approval after the close of regular U.S. markets.

Under the agreement with Justice Department officials, AT&T said in a statement, customers will be able to continue to receive Road Runner service through June 2002 "to avoid disruptions."

AT&T has a 57% voting stake in Excite@Home and owns 26% of its shares. MediaOne has a 25% stake in Road Runner in partnership with Time Warner Inc. and other companies.

The relationships are further intertwined because America Online Inc., the No. 1 Internet service, also would have a stake in Road Runner when America Online buys Time Warner.

Justice Department officials also addressed concerns that AT&T-MediaOne and AOL- Time Warner together would control too much of the cable broadband market, and could prevent unaffiliated content providers from getting access to their systems.

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