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AT&T/MediaOne deal OK'd
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May 25, 2000: 7:56 p.m. ET
MediaOne must sell interest in high-speed Internet provider Road Runner
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NEW YORK (CNNfn) - The Department of Justice on Thursday conditionally approved AT&T's proposed $62 billion acquisition of cable television firm MediaOne, clearing one of the last hurdles in a mammoth deal that would make AT&T the nation's largest cable company.
As part of the approval, AT&T (T: Research, Estimates), the nation's leading long-distance provider, must divest MediaOne's (UMG: Research, Estimates) 25 percent stake in high-speed Internet provider Road Runner no later than Dec. 31, 2001, the Department of Justice said. In the interim, AT&T must keep its management in Road Runner separate from the rest of the company.
"The Road Runner divestiture is an obligation we always assumed we would face, and the decree proposes both a schedule and process that are fair and feasible," said Jim Cicconi, AT&T's general counsel.
In a filing to the U.S. District Court in the District of Columbia, the Justice Department said AT&T's controlling interest in Excite@Home, a provider of broadband Internet access, and MediaOne's stake in Road Runner would substantially curtail competition in the "aggregation, promotion and distribution of broadband content."
Road Runner is principally owned by MediaOne, Time Warner Inc., Microsoft (MSFT: Research, Estimates), and Compaq (CPQ: Research, Estimates). Time Warner, parent of CNNfn.com, holds a nearly 40 percent stake in Road Runner, a Time Warner spokesman said.
 AT&T, based in New York, has 74 percent voting control plus 25 percent economic interest in Excite@Home, said AT&T spokesman Jim McGann.
Excite@Home, of Redwood City, Calif., is the largest provider of high-speed Internet access while Road Runner, of Herndon, Va., is the nation's second-largest.
AT&T must also obtain Justice Department approval before entering into certain agreements with AOL and Time Warner regarding cable modem or joint residential broadband service, AT&T said. Time Warner (TWX: Research, Estimates) is currently involved in a merger with America Online (AOL: Research, Estimates).
AT&T/MediaOne merger faces FCC scrutiny
Announced in April 1999, the AT&T/MediaOne deal still faces scrutiny from the Federal Communications Commission. In October 1999, MediaOne shareholders approved the deal. AT&T shareholders are not required to approve the deal, McGann said.
AT&T's Cicconi said he expects to gain FCC approval shortly and approval could come within a week, sources said.
On May 2, AT&T reported first quarter earnings of $1.7 billion, or 53 cents a share, compared to $1.7 billion, or 61 cents a share, for the same quarter a year ago. Earnings per share fell as the number of shares outstanding rose about 18 percent. The per-share numbers were in line with the consensus of analysts surveyed by earnings tracker First Call.
On April 26, Englewood, Colo.-based MediaOne reported net income of $1.2 billion, or 1.78 a share, for quarter ended March 31 compared to a loss of $125 million or 21 cents a share for the year-ago period.
An AT&T spokesman said the AT&T/MediaOne deal may close by the end of second quarter, but could last until August.
On Thursday, AT&T shares closed down 3/4 to 34, while MediaOne fell 13/16 to 64-15/16. 
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