AOL, AT&T/Comcast close to resolving TWE breakup


AOL Time Warner Inc. is close to a deal that would unwind its Time Warner Entertainment partnership with AT&T Corp.

The partnership, owned 28 percent by the telephone company, has tied up some
of AOL Time Warner's best assets for years, including Home Box Office, Warner Bros. and Time Warner

The breakup would have AOL Time Warner taking full ownership of the content assets and
leaving the cable systems in a new partnership with Comcast Corp. (which is in the
process of buying AT&T's cable operations).

AOL Time Warner would pay AT&T about $2 billion in cash and $1.5 billion in stock for
its stake in the content assets and leave AT&T with 25 percent to 30 percent of the
cable operation -- a stake that could be worth $5 billion. That would value
AT&T's stake at $8.5 billion, about 33 percent less than the telco had been

The old Time Warner Inc. sold off pieces of the TWE partnership 10 years ago to
get debt off its balance sheet. One buyer was U S West Inc., which spun off a cable
unit, MediaOne Group Inc., which was acquired by AT&T in 2000. Time Warner
executives realized quickly that they had given up control of the company's best assets,
and they have been trying to unwind the deal since 1994.