Knight Ridder/Tribune Business News
Apr. 26 -- If AT&T Corp. succeeds in its $62-billion bid for MediaOne, the phone giant will not only provide long-distance service to one out of every two phone customers, but cable service to more than one in every four U.S homes.
The deal would make AT&T, the country's biggest long-distance company, the nation's biggest cable company as well.
"They'll be the king of the hill and it will be difficult, if not impossible, to knock them off," says Jeff Kagan, a telecommunications analyst in Atlanta.
"AT&T obviously was sad to lose its telephone monopoly and is doing everything possible to rebuild it in the cable industry instead," said Gene Kimmelman, codirector of Consumers Union in Washington.
He said that the deal would give AT&T disproportionate influence over cable TV rates and the programming seen by many cable subscribers.
New York-based AT&T Thursday made a surprise bid to buy MediaOne in an effort to foil a merger agreement between Comcast Corp. and MediaOne.
Comcast, the fourth-largest cable operator in the country with 800,000 customers in Michigan, in March announced its plan to buy MediaOne for roughly $48 billion.
MediaOne, the nation's third-largest cable company with 300,000 customers in Michigan, has 45 days to consider other offers.
AT&T's bid would pay MediaOne $58 billion in stock and cash. Under the agreement, AT&T would also assume $4.5 billion of MediaOne's debt.
AT&T stock closed at $53.38, down $3.38 a share Friday. Some industry experts worried whether it can manage the takeover of MediaOne while it's still trying to absorb Tele-Communications Inc., the cable company it bought last month.
MediaOne's stock soared Friday to close at $77.38, up $7.88.
AT&T is buying cable companies so that it can use the fiber-optic cable lines to break into the $110-billion local phone market as well as the cable TV and high-speed Internet business.
Experts say AT&T needs to transform itself from a long-distance phone company to a full-service telecommunications company to survive in a competitive market where regional phone operators will eventually be allowed to compete in the long-distance game.
"AT&T is on the defensive as much as they are the offensive," explains Rick Franklin, director of telecommunications research for Roney Capital Markets in Detroit. "If they can sell telecom services to residents, there's a good chance AT&T will be able to keep them as customers."
By offering local phone service, cable TV and high-speed Internet in addition to long-distance service, AT&T can increase the money its gets from a single customer as much as four-fold, Franklin said.
The Associated Press contributed to this report.
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