AOL seals film studio deal

AOL has regained full control of the Warner Brothers film studio

AOL Time Warner has bought out telecom giant AT&T's stake in Time Warner Entertainment (TWE) in a deal estimated at $9bn (£5.9bn).

TWE includes the HBO cable channel, Warner Brothers film studio and Time Warner Cable, and has been run as a partnership for the past 10 years.

For more than two years, Time Warner chiefs have sought to unravel the partnership, but have seen a series of proposed deals collapse.

Analysts have said that ending the tie-up would simplify AOL's business and provide a welcome cash boost for AT&T.

Investors welcomed the deal, with AOL's shares closing up 97 cents at $14.33 and AT&T up $1 at $12.18.

Complex deal

Under the terms of the deal, AT&T will sell its 27% stake in TWE for $2.1bn in cash, $1.5bn in AOL shares and a 21% stake in the Time Warner Cable business.

AOL Time Warner meanwhile gets sole ownership of HBO and Warner Brothers, and 79% of the cable business.

In addition AT&T will also give AOL's America Online internet service access to its high speed cable lines.

AOL plans to float part of its stake in Time Warner Cable when the restructuring is completed next year.

AOL Time Warner's chief executive Dick Parsons said the deal was "the best possible outcome for our investors".

Tough year

Analysts hope the deal will provide a boost to AOL Time Warner's share price.

The value of the company - formed through the merger of AOL and Time Warner in 2000 - has fallen by more than 70% this year.

Along with other media and internet companies, it has seen debts rise while its advertising revenues and asset values diminish.

During the first three months of this year, the firm was forced to make a record write-down of $54bn.

Earlier this month, the company's chief operating officer Robert Pittman resigned, amid increased scrutiny of the company's accounts.

Criticism continues

While the deal has been welcomed, AOL's troubles are continuing.

In a survey by the University of Michigan's America Customer Satisfaction Index earlier this week, AOL scored a satisfaction rate of just 59% - the lowest in the online category.

An AOL spokesman said the company's own figures showed customer satisfaction hitting record levels.

The company has also been under investigation by securities regulations over allegations of financial irregularities.

And it is facing a lawsuit from investors over misleading revenue figures.