Wednesday, June 24, 1998 Published at 14:21 GMT 15:21 UK
Business: The Company File
Cable TV and telecoms converge
The American long-distance telephone company AT&T had bought the biggest US cable television operator TCI for $48bn (£29bn).
The deal will open up access to local telephone markets for AT&T, which has been struggling to compete with the local "baby bells" who were split off from the telecoms giant in the l980s.
In the deal, AT&T will pay $32bn in stock and assume debts of $16bn from TCI.
John Malone, head of TCI, will remain head of a separately quoted subsidiary, Liberty Media, and join the main AT&T board.
TCI serves 14m homes and is a major programme maker. Chief executive John Malone said the deal would provide "enormous technical synergies" between the two companies.
AT&T hopes to sell digital phone services and internet connections to its new cable customers.
The company forecasts that its new consumer services division, which will also be separately listed, will have revenues of $33bn next year, generating pre-tax profits of $7bn to $7.5bn a year. The companies hope to save $2bn a year in operating costs from the merger.
AT&T Chief Executive Michael Armstrong said, "This investment with TCI is really the beginning of a consumer based strategy.. which will able to deliver a broad array of services to our customers."
The merger is the latest in a series that has been transforming the telecoms industry in the US. Recently the seven main local phone operators have been reduced to four, while MCI and WorldCom, the number two and number four long distance companies also plan to merge.
The deal is a coup for TCI, whose previous merger deal with local operator Bell South for $16bn fell through in 1993.
Other cable company stocks rose in New York on the news.
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