Libertys Broadband Grasp Reaches Wireless

Liberty Media Group's broadband-investment strategy
now includes wireless distribution assets, after the AT&T Corp. unit's deal last
week to buy The Associated Group Inc. for about $3 billion in stock.

The deal, incidentally, also increased chairman John
Malone's voting control of Liberty.

The purchase of the Pittsburgh-based owner of diverse
communications companies gets Liberty a 41 percent stake in Teligent Inc.

Teligent is a Vienna, Va.-based leading supplier of
broadband communications -- including local phone service, long distance and Internet
access -- to small and midsized business customers.

The deal -- set to close in early 2000, and subject to the
approval of Associated stockholders and the government -- would also augment
Liberty's wireless capabilities with the acquisition of TruePosition Inc., another
Associated business, which touts its patented "Wireless Location System."

AT&T -- which is nominally Liberty's parent
company -- has principally made its broadband bets on cable, with multibillion-dollar
acquisitions of former Liberty parent Tele-Communications Inc. and competitive
local-exchange carrier Teleport Communications Group (formerly owned by cable operators),
as well as its pending deal to buy MediaOne Group Inc.

But AT&T has also been working on so-called
fixed-wireless applications, which would extend broadband capabilities beyond the
businesses and residences served by TCG and the cable companies.

So there are logical tie-ins with Teligent for AT&T, as
well as for Liberty, which has invested in Internet-distributed music services and other
broadband applications.

Through the TCG acquisition, AT&T already owns licenses
to operate data services with fiberlike capacity because TCG had previously bought a
company called BizTel. Teligent, though, controls a lot more spectrum in its major

In recent weeks, rival long-distance carriers Sprint Corp.
and MCI WorldCom have been cutting deals to buy
multichannel-multipoint-distribution-system carriers, with an eye toward offering
broadband-data services.

Like AT&T, Sprint and MCI have been searching for
alternate means of directly connecting to customers, bypassing the regional Bell operating
companies, which charge LDCs for completing calls.

Also last week, Qwest Communications International Inc.
said it would spend $90 million for a 19 percent stake in Advanced Radio Telecom Corp.,
another wireless carrier operating similar services to those of Teligent and WinStar
Communications Inc.

In the deal, Associated shareholders will get 25.9 million
shares of class A Liberty common stock, as well as 19.7 million shares of AT&T common
stock, for each share of Associated class A and class B common stock.

Associated, which already owned 19.7 million AT&T
common shares, will have its shares retired.

At the same time, Liberty will retire 14.4 million shares
currently held by Associated shareholders, including 2.7 million Liberty class B shares,
which are the supervoting kind.

With those shares out of the way, Malone's grip on
Liberty grows.

The transaction is structured in a way that would save
Associated stockholders hundreds of millions of dollars in taxes collectively, according
to a source close to the deal.

The $3 billion valuation includes the assumption by Liberty
of $187 million of Associated debt. But the cost to AT&T and Liberty, in effect, is
less than $1 billion due to the AT&T and Liberty stock being retired, according to

The deal allows Liberty to gain a substantial investment at
a "pretty good price" in a company that is deeply involved in the growing phone
and Internet businesses, said Tom Eagan, cable and satellite analyst at PaineWebber Inc.,
adding that the announcement was unexpected.

"It was a bit of a surprise for Liberty to buy what
is, more or less, a distribution company, but it ultimately fits in with what they said at
the recent investor meeting about taking advantage of opportunistic buys in the greater
media sector," Eagan said. Liberty has focused for the most part on programming and
content providers.

"The Associated transaction is a unique opportunity
for Liberty," president and CEO Robert "Dob" Bennett said in a prepared

Associated and Teligent brass also embraced the deal.

Myles P. Berkman, chairman and CEO of Associated, declared
the deal "the culmination of 20 years of value creation for our shareholders,"
while Teligent chairman and CEO Alex Mandl expressed excitement at the opportunity to work
with Malone, who he referred to as "one of the communications industry's

"With this investment, Liberty Media is supporting the
critical evolution of broadband networks," Mandl said in a prepared statement.

"In Liberty, you get a company that is more
adventuresome and willing to take some risks that may benefit Teligent down the
road," said a source close to the deal, who spoke on the condition of anonymity.
Associated was characterized by the source as a "less-than-strategic" investor.

Liberty's 40 percent share will not give it a
controlling majority of Teligent's board. Mandl is expected to continue to be the
driving force behind the company he started after leaving the presidency of AT&T in
the summer of 1996.

Mandl knows Malone, and sources said the two men have
"a good comfort level with each other."

Other Associated assets include a piece of a Mexican
cellular-telephone company, as well as ownership of radio-broadcasting properties.
Teligent is clearly the crown jewel in the deal for Liberty, and some analysts feel that
it may dispose of the other assets.

Lee Masters, CEO of the newly christened Liberty Digital
unit -- the vehicle for Malone's foray into cyberspace and e-commerce -- expressed
his happiness with the deal. "Anytime there is a broadband-distribution platform made
available for products that we're developing, we have to be pleased," he said.

Investors appeared to figure that the deal was better for
Teligent than for Liberty. Liberty's share price declined by 19 cents last Tuesday,
to $66.25, while Teligent's share price rose $5.44, to $54.56.