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Wednesday, Jul. 8, 1998
Senators upbeat on AT&T-TCI merger plan
Deal holds promise of opening local phone market to competition, lawmakers say
By JEANNINE AVERSA
Associated PressWASHINGTON -- The Senate's top antitrust lawmakers expressed hope Tuesday that AT&T's proposed merger with cable giant Tele-Communications Inc. may succeed where Congress has failed: opening the $110 billion local phone market to competition.
At a hearing on the matter, several senators said they believe the merger holds great promise for bringing this about. They included Sen. Mike DeWine, R-Ohio, chairman of the judiciary antitrust, business right and competition subcommittee, its top Democrat, Sen. Herb Kohl of Wisconsin, and Sen. Patrick Leahy, D-Vt.
But they wondered whether investor jitters over the merger would derail it. AT&T Corp. Chairman C. Michael Armstrong assured them: ``The deal is done. The deal will go through pending a shareholders vote.''
And the lawmakers questioned whether AT&T would in fact upgrade as promised TCI's cable systems so they'll be able to provide local phone service if the deal does go through.
TCI's owned and affiliated cable TV systems reach about one-third of the country's homes. After they are upgraded, AT&T plans to offer residential customers one-stop shopping for local, long-distance, cable TV, Internet and data services.
``AT&T even with this acquisition has an outstanding balance sheet, has an outstanding cash flow and has the ability to not only invest in the upgrade of the (TCI's) network for telephony which is about $300 to $500 per home'' as well as continue investing in local phone projects covering the rest of the country, Armstrong said. ``We intend to show up in all those areas.''
But some investors in AT&T's stock, the nation's most widely held, worry that AT&T won't recoup this investment anytime soon. News of the proposed merger has battered AT&T's stock price.
Armstrong said he anticipated a short-term drop.
``With so many of our shareholders who are earnings-per-share driven, . . . to transform AT&T from just an earnings-per-share company to a growth company you are going to have churn,'' Armstrong said. ``Whenever you have churn, generally, the stock goes down.''
Still, Armstrong dismissed speculation within the investor community that the drop in AT&T's stock price will force the deal to be renegotiated.
``There's nothing to those rumors,'' Armstrong told reporters after the hearing. I anticipate that shareholder value will not only be restored, but will appreciate,'' he added.
Federal regulators and consumer groups also indicated that the deal holds the promise of breaking the regional Bell telephone companies' nationwide stranglehold over local phone service -- a key, but largely unrealized, goal of a 1996 telecommunications law that freed local, long-distance and cable companies to get into each others' businesses.
And greater competition in the local phone market could also hasten the day when the regional Bell companies are permitted to offer long-distance phone service to their local customers. The Federal Communications Commission hasn't allowed that yet, saying the Bells haven't sufficiently opened their markets to local phone competitors -- a prerequisite for their entry into the long-distance business.
Most of the local phone competition that has evolved since the 1996 law has mainly targeted business, not residential, customers.
Senate Judiciary Committee Chairman Orrin Hatch, R-Utah, a frequent critic of Microsoft Corp., said he's worried that Microsoft wants to control the brains inside future digital cable boxes. TCI will use Microsoft software in 5 million of the cable company's future digital boxes. Microsoft also has other cable industry investments.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web