In the latest chapter of AT&T's misstep over Excite@Home, the telco is now paying Cox and Comcast $3.4 billion worth of stock for hanging on to their shares in the ailing high-speed Internet company.
This deal subsitutes for an agreement under which AT&T would be forced to buy the companies' Excite@Home shares for $48 each, twelve times the $4 those shares are worth today. The new deal gives AT&T about $1.2 billion in tax benefits the old deal didn't, easing the telco's pain a bit. When AT&T gave Comcast and Cox the "put" for their 69 million Excite@Home shares 18 months ago, Chairman Mike Armstrong wanted to secured as much control of the Internet company as possible.
Now, that's not as high a priority as limiting AT&T's cost by creating taxable losses around what would otherwise have been a tax-free exchange. The deal is now taxable to Cox and Comcast as well, so AT&T had to increase the number of shares it was paying the MSOs to compensate them. AT&T will now remain a 24% owner of Excite@Home, while Cox and Comcast will now own about 6% each.
- John Higgins