Justice Department Approves AT&T Acquisition of MediaOne

AT&T (T Quote) moved closer Thursday to becoming the nation's largest cable company, as the Justice Department approved its acquisition of MediaOne(UMG Quote) on the condition that it sell off MediaOne's minority stake in Road Runner, the No. 2 provider of high-speed Internet access.

AT&T already owns a controlling stake in Excite@Home, the leading provider of broadband Internet access, and the MediaOne acquisition would have given it dominance in this market.

"The merger as proposed would have had an anticompetitive impact on the emerging broadband market," Joel Klein, assistant attorney general in charge of the Justice Department's antitrust division.

"The divestiture assures that AT&T will not acquire undue leverage in its dealings with broadband content providers, and American consumers will be the ultimate beneficiaries," he added.

AT&T was trading down 1/4, or 0.7%, at 34 1/4 in thin after-hours trading, according to Instinet. MediaOne was not active.

The Justice Department filed a complaint Thursday in federal district court in Washington, D.C. saying that "the combination of AT&T's interest in Excite@Home and MediaOne's interests in Road Runner would substantially lessen competition in the aggregation, promotion and distribution of broadband content."

But the department filed a proposed consent decree in court, which would allow the deal to go ahead as long as the Federal Communication Commission also approves it.

Under the terms of the decree, AT&T of New York must sell MediaOne's stake in Road Runner by Dec. 31, 2001. Until then, AT&T was told it must keep its management of Road Runner separate from the rest of the company.

"We're very pleased to have reached this major milestone in the MediaOne merger approval process and we look forward to closing the deal as soon as possible," said Jim Cicconi, AT&T's general counsel.

"Before and after that divestiture, we will remain fully able to roll out new broadband capabilities -- including high-speed Internet access -- to our subscribers," Cicconi said.

AT&T, has contended that it needs the acquisition of MediaOne in order to compete with regional Bell companies.

Last year, AT&T acquired Tele-Communications Inc., the nation's second-largest cable television company. By acquiring MediaOne, the No. 4 cable operator, AT&T's cable holdings will surpass those of Time Warner(TWX Quote).

The company expects the FCC to approve the MediaOne deal, although it may have to sell either Liberty Media Group, its cable programming arm, or its 25% stake in Time Warner Entertainment.

Critics of the deal oppose AT&T's attempt to raise its share of the cable market. They have said that the acquisition of MediaOne will give AT&T penetration into 57% of American households.

AT&T has said that its penetration would be lower than that, but higher than the 30% allowed under previous FCC rules that are currently under review.