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Friday, April 23, 1999 Published at 08:22 GMT 09:22 UK

Business: The Company File

Cable wars intensify

Coming soon...broadband Internet and telephone services

The war to control the US cable TV networks intensified as telephone company AT&T launched a $58bn hostile bid for cable operator MediaOne.

It is the largest hostile takeover bid ever launched.

AT&T, the largest long-distance operator, wants to use the cable TV network to deliver local telephone calls and high-speed Internet access, bypassing its rivals, the regional telephone companies.

It has already bought another cable network, TCI, for $55bn. Adding MediaOne would give AT&T access to 26.5m households, adding key markets like Los Angeles and Boston.

Jeffrey Kagan, an independent industry analyst in Atlanta, said such a move by AT&T was to be expected. "Since AT&T decided that cable was the pathway of choice in the home, they need as much cable as they can get their hands on."

Hostile bid

MediaOne has already agreed to merge with another cable operator, Comcast, in a deal worth $48bn.

AT&T is offering MediaOne shareholders an extra 20% if they agree to its rival bid - and giving them cash as well as shares.

It plans to raise up to $30bn in cash to fund its bid, in the largest syndicated financing deal ever by the corporate sector.

Michael Armstrong, AT&T chairman and chief executive said:

"Together, AT&T and MediaOne will bring broadband video, voice and data services to more communities, more quickly than we could separately or, in MediaOne's case, with any other company."

Many analysts gave the bid a good chance of success.

"MediaOne as a whole could be better off with TCI, which is part of AT&T, than with Comcast," said Eric Melloul, a telecommunications analyst at Argus Research.

AT&T has already won the backing of a key MediaOne shareholder, Amos Hostetter, who owns 9.33% of the company.

Cable wars

If AT&T's bid succeeds, it will surpass Time Warner as the biggest cable operator in the United States.

It says its ambition is to have access to two-thirds of the nation's 100m cable households.

Denver-based MediaOne, which was once part of regional telephone company US West, is the fourth largest US cable company, strongest on the Pacific coast and in Florida.

It had a good geographic fit with Comcast, based in Philadelphia and partly owned by Microsoft. Comcast also owns cable networks QVC and E! and the Philadelphia Flyers ice hockey team and 76ers basketball team.

Both AT&T and Time Warner are in the process of rolling out broadband Internet home connections, offering speeds up to 100 times faster than existing modems.

The threat of a third national cable system, which could rival their efforts, was what precipitated the hostile bid.

Merger fever has swept the US telecommunications sector, with huge mergers among the regional companies, and it has now spread to Europe with the Deutsche Telekom-Telecom Italia deal.

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