AT&T Corp. may take steps toward selling its 25.5 percent of Time Warner Entertainment LP to the public because it isn't satisfied with AOL Time Warner Inc.'s offer to buy the stake.
AOL Time Warner is offering $9 billion to $10 billion for the stake, but Wall Street analysts value it at around $20 billion. Another problem is that AOL want's long-term carriage agreements for its netoworks. "Everything they talk about comes with 10-year deals for Turner and HBO with big escalators," said one AT&T executive.
Time Warner Entertainment includes most of Time Warner Cable's systems, Warner Bros. and HBO. AT&T is under regulatory pressure to sever its ties with AOL, so AOL President Gerry Levin thinks he has all the leverage in negotiations. Trying to sell the stake in an initial public offering won't be easy without AOL's cooperation. "It's a negotiating tactic," said one Wall Street executive.
- John Higgins