AT&T Wraps $2.6B Sale of 763K Subs

AT&T Broadband completed a flurry of systems deals last week, shedding 763,000 subscribers and raising about $2.6 billion in three separate transactions.

The deals, all of which had been previously announced, will help the Broadband unit pare down debt as it moves closer to a planned initial public offering in the fall.

In three separate announcements, AT&T completed sales of 115,000 subscribers in Baltimore to Comcast Corp.; 94,000 subscribers in Columbia, Jefferson City and Springfield, Mo., to Mediacom Communications Corp.; and 563,000 subscribers in three states to Charter Communications Inc.

The Comcast deal, the final piece of a settlement over AT&T's buyout of MediaOne Group Inc. in 1999, involved about $518 million in cash to AT&T.

Comcast received about 595,000 subscribers in New Mexico, Maryland, Delaware, New Jersey, Pennsylvania and Tennessee from AT&T in May in exchange for 63.9 million shares of AT&T stock that Comcast owned. Comcast had acquired the AT&T shares through its ownership stake in Teleport Communications Group Inc., which AT&T acquired in 1998.

The first stage of the settlement was completed in January.

In February, Charter announced that it would buy 563,000 subscribers in Alabama, St. Louis, and Reno, Nev., from AT&T Broadband in exchange for $1.75 billion in cash and a system in Sebastian, Fla. with 9,000 subscribers valued at $24 million.

Including the exchange of the systems in Florida, Charter netted 554,000 subscribers in the deal.

Daniels & Associates represented AT&T in the sale. Waller Capital Corp. represented Charter in the Sebastian sale.

Charter systems in the Miami Beach, Fla., area, originally included in the transaction, will remain with Charter.

Charter spokesman Andy Morgan said the decision to remove the Miami system from the deal came after Charter and AT&T discovered they were overbuilding each other in a small portion of the market — about 6,000 subscribers. Because the parties felt that seeking regulatory approval for that system would have held up the overall deal, they decided not to include it.

The St. Louis deal locks up that market for Charter, which already had systems in the surrounding areas. AT&T will use the proceeds of the Charter and the other deals to help pay down its debt.

"With these transactions, Charter gains significant operational and technical efficiencies in the St. Louis metropolitan area, a top 20 ranked U.S. cable market, and in Alabama as well," Charter CEO Jerry Kent said in a press release.

"These transactions are important steps in our strategic plan to create large clusters of customers in major metropolitan markets," AT&T Broadband CEO Dan Somers said, also in a press release. "And they help us to remove more debt from our balance sheet."

AT&T announced in October its plan to split into four separate units — consumer long distance, business services, broadband and wireless. The wireless unit is expected to be spun off on July 9.

According to a proxy statement issued May 11, the Broadband unit will be saddled with a large portion of AT&T's total debt — about $15.6 billion. Most analysts called that an appropriate amount, given that AT&T has spent about $120 billion on cable acquisitions in the past three years.

Mediacom's $309 million transaction was part of a larger acquisition of 840,000 subscribers in Missouri, Illinois, Iowa and Georgia from AT&T for $2.2 billion. Mediacom first announced that acquisition in February and expects to close the rest of the deals in the third quarter.

Credit Suisse First Boston, J.P. Morgan and Salomon Smith Barney Inc. served as financial advisors to Mediacom in the transaction. Daniels & Associates represented AT&T in the sale of the systems.