Wall Street analysts welcome alliance

NEW YORK — Three cable operators — TeleCommunications Inc., Comcast Corp. and Cox Communications — emerged big winners Thursday with multibillion-dollar profits from AT&T Corp.’s proposed $11.3 billion acquisition of cabler-controlled telco Teleport Communications Group.

At the same time, Wall Street analysts speculated that the deal could mark the beginning of a long-expected alliance between TCI and AT&T because the cabler will emerge from the deal with about 3% of AT&T stock.

Teleport, a low-profile telco that offers local phone service to busi-nesses in most major markets around the U.S., was 66% owned by the three cablers. The three companies, which had 95% voting control, “approved the merger by written consent,” AT&T and Teleport said in a statement.

The three emerge with huge prof-its, having invested a total of about $400 million in the company when they initially bought in about five years ago, according to Lehman Bros. analyst Larry Petrella.

AT&T is offering stock worth $59 for Teleport stock, valuing the cablers’ total shareholding at $6.8 billion for a one-time gain of $6.4 billion. All up, the three cablers will own just under 10% of AT&T, an AT&T spokes-woman said. TCI closed up 18¢ to $28.68, Comcast rose 43¢ to $30.87 and Cox dropped 62¢ to $39.87.

Cox and TCI, which invested ear-lier than Comcast, reap the biggest gains. TCI walks away with a profit of about $2.8 billion, while Cox’s profit will be close to $2.2 billion and Com-cast’s profit more than $1.4 billion, analysts estimate.

Lehman’s Petrella said AT&T stock was very liquid so the cablers could sell it and use the money for various purposes. TCI chairman John Malone said in a statement, “We are very pleased with the increased flexi-bility and liquidity” that TCI Ventures — the affiliate that holds the Teleport stake — gains from the deal.

But TCI may want to keep its shareholding. There has been specula-tion in recent months, particularly since AT&T sold its stake in sat TV operator DirecTV, that AT&T and TCI might come together in an alli-ance that would help TCI expand its telephone service.

“This raises the question of whether this is the beginning of a relationship,” Petrella said. An AT&T spokeswoman said, “Certainly, we understand the strategic importance” of anyone who owns as much stock as the cablers, but she declined to com-ment further.

TCI also declined comment, al-though TCI president Leo Hindery has said often in recent weeks that he expects this year will see the cabler form many alliances to further its business plan.

The deal also highlights the value of the investments held by many of the cablers, which Wall Street has ignored until recently. Several of the cablers also have a big stake in the Internet company At Home, which is now publicly traded.

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