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AT&T moves to extend control of Excite@Home

The high-speed Net provider will scrap plans for a separate stock to monitor the performance of its media holdings.

High-speed Net provider Excite@Home said today that it will scrap plans for a separate stock to monitor the performance of its media holdings.

Today?s decision is an about-face from plans for a tracking stock announced in November. Shares of Excite@Home soared on the news, jumping almost 10 percent by market close.

Forrester Research analyst Bruce Kasrel said that today's decision goes against earlier plans that would have given the broadband Net service provider more autonomy from its majority shareholder, AT&T.

"If you talked to them a while ago, they were very excited about what the tracking stock would do and how it let them make decisions independent of AT&T and other cable owners," he said. (Additional comments from Kasrel are available on CNET Investor.)

Excite@Home?s largest shareholder has made several decisions to tighten its control over the broadband portal and Net service. AT&T says it has the right to elect a majority of Excite@Home?s board members. As a result, representatives from Comcast and Cox, the firm?s other cable partners, will resign their seats on the board.

Under today?s agreement, Comcast and Cox will be able to sell their shares of Excite@Home to AT&T for a minimum of $48 a share between Jan. 1, 2001, and June 4, 2002.

The three companies have been under contract to use Excite@Home as their exclusive cable Net provider until 2002. Under today's deal, AT&T agreed to use the company as its broadband Net provider, though not necessarily exclusively, until 2008; Comcast and Cox will continue to carry Excite@Home's services, though not necessarily exclusively, until 2006.

You've got Time Warner AT&T will also consolidate Excite@Home's financial results into its own. The move is expected to reduce the telecommunications company's earnings by 5 cents a share this year, according to Bloomberg News.

The high-speed Net service has been plagued by a sagging stock price and by concerns over its strategic vision since @Home merged with Web portal Excite. The seemingly conflicting agendas of the two sides led many to believe that Excite@Home would consider separating them--or would sell its media assets altogether.

Plans for a tracking stock, however, pointed to the company's commitment to keep its media assets.

AT&T?s decision to tighten its control could address some concerns surrounding Excite@Home. The move could also be seen as a response to plans by America Online and Time Warner to create a broadband content giant, which could threaten Excite@Home?s market lead.

"I think it's got to be a pretty heavy motivating factor," Forrester's Kasrel said.

The move also goes somewhat against earlier comments that the telecommunications company would rather distribute Web content than own it. AT&T was a proponent of splitting Excite@Home?s media and broadband assets.

"It's really a new commitment by AT&T, Comcast and Cox to both our broadband business and technology as well as Excite@Home," said AT&T chief executive C. Michael Armstrong. "For sure, it removes a lot of the The new world order uncertainty about the cable companies, particularly AT&T, and our role with Excite@Home."

Armstrong said the extension of the telecommunications company's contract with Excite@Home through 2008, coupled with earlier announcements that it plans to work with MindSpring to offer cable Net access, "reaffirms our commitment to opening the Internet infrastructure with multiple providers."

On a conference call with analysts and reporters, executives emphasized that the deal should clear the air of questions about Excite@Home's future, the commitment of its owners, and the management direction of the company, which is now simplified.

"I think the principal goal of the new distribution agreements is to create clarity and alignment for all involved," said Excite@Home chief executive George Bell. "Clearly AT&T has more control, and that's all to the good."

For their parts, executives at Cox and Comcast indicated that their reduced ownership stakes and lesser management control clears the way for a greater return, as the lack of clarity about Excite@Home's future has limited launching services and may have held back the company.

According to Jupiter Communications, the U.S. market for high-speed services will increase to 15.3 million customers in 2003, up from about 2.2 million subscribers at the end of 1999.

Excite@Home chairman Tom Jermoluk served as the primary negotiator for the company in the deals, Bell said.

As part of its six-year contract extension with AT&T, its Excite.com portal will be a featured Web site on the first screen of the AT&T@Home high-speed Internet service.

"We've secured a long-term future for the Excite portal in what we think will be the most important distribution medium," Bell said.

Bloomberg News contributed to this report.