FCC Conditionally Approves AT&T Acquisition of MediaOne - TheStreet

The

Federal Communications Commission

gave conditional approval Monday to

AT&T's

(T) - Get Report

planned $58 billion acquisition of

MediaOne Group

(UMG)

, paving the way for AT&T to become the biggest cable operator in the country.

To receive approval, AT&T agreed to sell some cable properties to comply with the FCC's 30% limit on cable subscribers nationwide. Including Englewood, Colo.-based MediaOne, AT&T's systems would reach more than 40% of the nation's cable subscribers. The telecommunications giant must decide on what it will divest within six months and complete the process within a year.

"This decision strikes the appropriate balance between promoting competition in local telephone service and protecting competition in cable and high-speed Internet net service," William Kennard, the FCC's chairman, said in a statement.

Gaining FCC approval was the last major regulatory hurdle standing in the way of AT&T's purchase of MediaOne. The

Department of Justice

approved the deal late last month after AT&T agreed to sell MediaOne's stake in

Road Runner

, a company that provides high-speed Internet access over cable-TV lines.

Once the deal to acquire MediaOne closes, AT&T, led by its chairman, Michael Armstrong, will have spent $130 billion to acquire MediaOne and the former

Tele-Communications Inc.

in an attempt to use cable lines to assemble a nationwide network. The network will provide both local phone service and high-speed Internet access as well as cable service.

AT&T pronounced itself "delighted" with the FCC's decision.

"We couldn't be more pleased with the successful approval of that

strategy by the regulatory authorities," said Jim Cicconi, the company's general counsel, in a conference call with reporters and analysts.

The FCC gave AT&T three options to meet the ownership limits. The company can sell its 25.5% stake in

Time Warner Entertainment

, a joint venture with

Time Warner

(TWX)

, which produces programming and owns cable systems; eliminate its ownership in

Liberty Media Group

(LMG.A)

, a programming arm run by cable titan John Malone or sell cable systems servicing 9.7 million subscribers nationwide.

Liberty Media Group, which AT&T acquired through its purchase of

TCI

, provides programming to Time Warner Entertainment.

N.J.-based AT&T has until May 19, 2001, to make whatever divestiture it chooses, and it has until March to let the FCC whether it will make that May deadline.

Cicconi of AT&T said the company had not decided which option it would take, though Cicconi seemed to indicate that a spinoff of Liberty Media was unlikely.

"We really don't have any intentions in that regard," he said, though he added that AT&T would consider each of its options. Liberty's Malone also sits on AT&T's board.

Cicconi said the company didn't necessarily believe that a complete sale of Liberty Media would be required for AT&T to insulate its programming assets from its cable distribution assets.

The FCC declined to impose "open access" requirements on AT&T that would require the company to open its cable lines to other Internet service providers. The company has a controlling stake in ISP

Excite@Home

(ATHM) - Get Report

(AT&T has 56% voting rights and 25% equity stake in Excite) and has agreed to end that company's exclusive rights to AT&T cable lines by June 2002.

"Consumers should have a choice among alternative broadband service providers," Kennard said. "I believe there are powerful marketplace incentives to ensure that consumers have such choices."

AT&T shares rose 1 1/8, or 3%, to close at 36 1/4.