AT & T takes control at Excite@Home
Restated MSO support still leaves questions about future
By Richard Tedesco -- Broadcasting & Cable, 4/2/2000 8:00:00 PM
The MSO partners of Excite@ Home presented a unified front with the cable broadband service last week, masking months of tensions as AT & T took charge.
And observers saw plenty of room for rifts to develop in the revamped relationship between the companies.
It was a complex turn of events: AT & T upped its share of Excite@Home stock to 74% from 58%, while Cox Communications and Comcast Corp. gave up their board seats and veto control. But if they don' t like AT & T' s tack, they can opt to cash in the 30 million shares they each own in Excite@ Home at a minimum of $48 per share between January 2001 and June 2002 or trade for AT & T stock.
All three of the MSOs extended their relationships with Excite@ Home, with AT & T agreeing to distribute the service through 2008 and Cox and Comcast committing to follow suit through 2006. But Cox and Comcast can opt to end their exclusivity agreements with Excite@Home in June 2002.
Some analysts view the restructuring as the opposite of a ringing endorsement for Excite@Home.
Tom Wolzien, media analyst for Sanford Bernstein & Co., sees the deal as an opportunity for America Online as the exclusivity options come up. "It really is a trade of @Home' s exclusivity for some sort of long-term agreement that will give it an opportunity to survive with AT & T and others," he said. "But it opens up the door for AOL at a point when cable' s modems will be at their maximum growth."
Joe Laszlo, broadband analyst for Jupiter Communications, said, "There' s very little downside to Cox and Comcast. If AT & T doesn' t use this to build a stronger service, they do have a lucrative way out."
The MSO executives emphasized their united approach. "It' s really a renewed commitment by AT & T, Cox and Comcast to both our broadband business and technology as well as Excite@Home," said C. Michael Armstrong, AT & T chairman and CEO.
"It really streamlines the decision-making for the company," said David Woodrow, Cox senior vice president of business development. "It allows us to be very focused in growing [Excite@ Home]."
Comcast and Cox will preserve Excite@Home customers as of 2002, agreeing not to "re-market" them to competing ISPs, according to George Bell, Excite@Home president and CEO. "Through 2008, Excite@Home is going to be there," he said. "But AT & T has freedom to put other portals up in that environment."
Bruce Leichtman, analyst for the Yankee Group, viewed the restructuring as bald-faced strategy to prop up Excite@Home' s sagging stock price, which slumped in the last six months from about $100 to about $30. It closed above $30 last week. "They threw a life preserver out to their investment," said Leichtman.
With the restructuring, Excite@ Home has abandoned plans for a tracking stock.
Major strategic issues loom, including AT & T skepticism about the Excite portal-acquired by @Home for $6.7 billion-to @Home' s broadband service. "The question is whether owning the Excite piece is still important," said Jupiter' s Laszlo. "I do think there' s potential for tension."
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