AT&T, AOL Suspend Move on Time Warner Entertainment

With share prices in the cable sector beaten down, AT&T Corp. (T) and AOL Time Warner Inc. (AOL) Tuesday said they temporarily put off a decision on the initial public offering of AT&T's stake in their Time Warner Entertainment joint venture.

The companies said they want to discuss alternatives and have asked that a binding independent evaluation of the stake's value be suspended.

AT&T, which owns about one-quarter of the TWE venture, and AOL Time Warner have asked Banc of America Securities not to deliver a long-awaited valuation of AT&T's stake in the venture and how much of that stake could be sold in a public offering.

That valuation was to be delivered Monday. The companies said they do not plan to provide updates on the situation unless they reach a definitive agreement or return to the registration rights process.

AOL and AT&T have been in talks for more than two years about long-distance leader AT&T selling its minority stake in Time Warner Entertainment, a venture that includes the Home Box Office cable network, Warner Bros. Studios and some cable systems.

AT&T would like to resolve the situation before completing the sale of its cable unit to Comcast Corp. , and AOL Time Warner wants to deal with the complicated venture as part of its broader efforts to simplify its structure.

"If they could clean up the structure and simplify AT&T's holdings to just cable, it would clearly enhance the product, but IPO-ing a piece of the cable unit would probably still not receive the highest market valuation in this climate," said Fred Moran, analyst at Jefferies & Co.

"The timing and circumstances surrounding the restructuring of TWE couldn't be more difficult," he added.

The companies had been moving forward on a rights registration for AT&T's stake in the venture, valued by some analysts at as much as $10 billion before the recent decline in cable sector stock prices, but management at AOL Time Warner had said it was seeking other options as well.

People familiar with the situation have said media heavyweight AOL Time Warner could offer AT&T up to $2 billion in cash and a stake in a publicly traded cable TV business in exchange for AT&T's interest in TWE.

Under one option being discussed, the people familiar with the situation said, AOL would combine its Time Warner cable property and the cable TV assets of TWE, and then sell the combined entity to the public. The programming portion of TWE would be absorbed into the rest of AOL and not sold to the public.