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After months of haggling, Viacom Inc. announced Jan. 20 the $2.3 billion sale of its cable systems to Tele-Communications Inc. affiliate Intermedia Partners.

The big surprise in the late-hour announcement was that it did not include settlement of Viacom’s antitrust lawsuit against TCI – despite the cable giant’s demand throughout the negotiations that the lawsuit be dropped before the cable deal was done.

TCI chairman John Malone vowed as recently as 10 days ago that he would not do the deal without settling its differences with Viacom.

“It’s a little like Stalin selling guns to Hitler,” Malone remarked.

Viacom and TCI are at odds over several issues, including carriage of Viacom’s basic cable networks MTV, VH1 and Nickelodeon and the possible merger of Viacom’s premium service with Showtime and TCI’s Encore.

Viacom had insisted that TCI agree to carry Viacom’s MTV and Showtime cable channels before the lawsuit was dropped.

A spokesman for Viacom said Viacom and TCI had agreed on the conditions that would allow the lawsuit to be dropped, mainly that the carriage agreements be signed. He added that the two sides had agreement on the carriage “pending action on this” but declined to elaborate.

It is understood, however, that the carriage agreement will be implemented, and the lawsuit dropped, once the cable sale closes. The sale is subject to a tax certificate from the FCC, however, an issue that has brought it into the spotlight from Washington.

Viacom said the sale was expected to close in the second half of the year. But making the lawsuit settlement conditional on closure means that any problems with the deal would re-open the lawsuit.

The spokesman denied that congressional scrutiny of the tax issues had any impact on timing of the announcement. “We announced things when they’re done.”

In a statement Jan. 20, Viacom chairman Sumner Redstone said “Viacom is a software-driven company and this agreement dramatically demonstrates our commitment to reinvesting in our core businesses. This transaction also is a significant step, both in realizing our strategic focus and in dramatically improving our capital structure for both the short- and long-term.”

Viacom will use the $2.3 billion proceeds from the sale to reduce its debt, putting its balance sheet in a much healthier position. Viacom’s stock price hit its highest point in the past 12 months based on the expectation of the cable sale.

The sale will also be important in Viacom’s plan to lift its credit rating nearer investment grade, which is important if the company is to reduce its borrowing costs.

Viacom’s systems, in Seattle, northern California, Dayton, Ohio, and Nashville, have 1.1 million customers. The entities buying the systems are Mitgo Corp and affiliates of Intermedia Partners, which is in turn tied to TCI.