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AT&T may be considering cable swap

As Ma Bell may soon have to pay its cable partners close to $3 billion for their Excite@Home stakes, Wall Street speculates that the company may instead try to offer them some of its cable networks.

As AT&T nears the date when it might have to pay its cable partners close to $3 billion for their stakes in struggling Excite@Home, Wall Street is speculating that Ma Bell may instead try to offer them some of its cable networks.

As part of a management reorganization plan worked out earlier this year, AT&T agreed to buy partners Comcast's and Cox Communications' stakes in Excite@Home for at least $48 per share.

That price was ambitious even at the time, as the cable Internet company's price had been falling steadily to below the $40 range. But at the current price of $5 and change, the market value of Ma Bell's near-$3 billion obligation has shrunk to just a fraction of its original worth.

Analysts say the company is looking for a way to make that bad deal look a little less painful, which might mean trading cable subscribers for the stock instead of cash.

AT&T isn't commenting on the reports. But analysts say the company could wind up trading between 300,000 and 400,000 cable subscribers each to Cox and Comcast instead of cash.

"Such a transaction would have positive implications for the cable companies involved," Salomon Smith Barney analyst Niraj Gupta said in a research note late last week. That type of deal would allow the two cable partners to shed "nonstrategic" stakes in Excite@Home for tax-free core cable assets, the analyst said.

Any such swap would have several advantages for AT&T. The telecommunications giant already has close to $67 billion in debt and is struggling to pay that back with unprecedented cuts in its dividend rates.

After its two-year cable buying spree, it has also has run up against federal caps in the amount of cable subscribers any one company can own. Ma Bell lobbyists have pressed Congress to lift that cap. But if AT&T were to relinquish some of its cable subscribers to Cox and Comcast, it could reduce regulatory pressure.

The company has also said it will spin off Liberty Media, its cable programming division, in part to satisfy those regulatory requirements.

The agreement allowing Cox and Comcast to sell their Excite@Home shares to AT&T kicks in Jan. 1, 2001, and will expire at the end of June 2002.