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Charter Communications to Purchase AT&T Cable Systems

March 01, 2001|From Bloomberg News

ST. LOUIS — Charter Communications Inc., the cable-television company controlled by billionaire Paul Allen, agreed to buy cable systems from AT&T Corp. in four states for $1.79 billion.

The sale, involving 574,000 customers, is the second for New York-based AT&T in two days as the biggest U.S. cable company raises money to reduce debt. Charter will pay AT&T as much as $500 million in stock, cable systems in Florida valued at $249 million and the rest in cash, or about $1.04 billion.

Charter has spent more than $14 billion buying cable systems near the areas where it already operates to more efficiently sell digital TV and fast Internet access to clusters of customers. The No. 4 U.S. cable operator hopes to more than double monthly bills from about $40 with the new services, known as broadband, while charging advertisers more for reaching more customers.

"It's a natural pickup for Charter," said Paul Bottum, a portfolio manager at Jundt Associates Inc., which owned 1.1 million Charter shares at year end. 'You keep your broadband costs minimized . . . it just sort of makes intuitive sense."

Charter is buying AT&T cable properties in Missouri, Alabama, Illinois and the Reno, Nev., area. In return, AT&T will get Charter systems with 62,000 customers in Miami Beach and Sebastian, Fla. Charter is selling its Florida assets because it doesn't have a concentration of customers there, Charter spokesman Andy Morgan said.

AT&T shares rose 9 cents to $23. They have fallen 49% in the last year. Charter, which first sold stock at $19 in November 1999, fell 63 cents to $21.38. Charter has risen 19% in the last 12 months for the second-biggest gain of any U.S. cable stock.

AT&T, also the nation's largest long-distance phone company, spent more than $100 billion under Chairman C. Michael Armstrong to buy cable systems, a strategy that investors say backfired when the company's stock fell on concern about mounting debt.

The company is trying to reduce its $46 billion in debt as it prepares to split into three companies and issue tracking shares for a fourth business.

AT&T Broadband said it would sell cable assets to Mediacom Communications Corp. for $2.2 billion. AT&T also agreed to sell its 10% stake in Japan Telecom Co., Japan's No. 3 phone company, to Vodafone Group for $1.35 billion.

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