This story was written by Keith Dawson for the Media Unspun email newsletter and is Copyright 2002 by Keith Dawson.
M E D I A   U N S P U N
AOL, AT&T Banking on Confusion
2002-07-30

Sitting up straight in your chair? Had your morning coffee? Good, that will help as we plunge into the tangled web that is Time Warner Entertainment.

TWE is a joint venture of AT&T and AOL Time Warner. AOL owns 72.7% (according to the New York Times) or 74.5% (Associated Press) or 73% (CNN). The Wall Street Journal played it safe with "close to three-quarters." The joint venture controls HBO, the Warner Brothers film studio, and most of AOL's cable operations (about 90%, according to CNN's helpful breakdown). AT&T has been wanting to cash out to reduce its debt load.

Still with us? More coffee might help.

TWE is worth anywhere from $7.5 to $10 billion, according to today's reports. Big numbers -- the Journal reported that an IPO for TWE would be "one of the biggest such offerings in U.S. corporate history." Last fall AT&T and AOL asked the Bank of America to nail down the joint venture's value so that AOL could buy out AT&T for cash and stock, or AT&T could take (some of) TWE public to raise cash. Yesterday the bank was ready to comply, but the two partners told them not to open the envelope, in the colorful phrase of an anonymous Times source. Consensus was that asking the bank to wait was a signal that the parties were close to an agreement about how to split up the assets. The New York Times and the Wall Street Journal both had sources close to the negotiations, and the two outlets ran similar stories.

CNN's Paul R. La Monica penned the only piece that Unspun found that went beyond the Times/Journal axis. La Monica crunched some numbers to fill in the background of the complicated partnership. While all the coverage mentioned a possible role for Comcast -- slated to buy AT&T's cable businesses later this year -- La Monica produced details of that company's deal with AT&T and the implications for any TWE sale. Finally, La Monica got a portfolio manager to say that the deal is all so darned complicated because "You have ... cash-strapped companies trying to come to terms on this transaction." Maybe they could move it to Divorce Court and make it easier for the rest of us. - Keith Dawson

AT&T and AOL Said to Seek Delay in Evaluation of Joint Venture
http://www.nytimes.com/2002/07/30/technology/30AOL.html

AOL, AT&T Seek Fresh Plans For Their Cable Partnership
http://online.wsj.com/article/0,,SB1027982833570732200,00.html
(Paid subscription required)

AOL and AT&T: Breaking up is hard to do
http://money.cnn.com/2002/07/29/pf/investing/q_aol/index.htm

AOL, AT&T Halt Registration Process (Associated Press)
http://www.washingtonpost.com/wp-dyn/articles/A18430-2002Jul29.html

AOL,AT&T deep in entertainment venture talks-papers (Reuters)
http://www.forbes.com/markets/newswire/2002/07/30/rtr679988.html