graphic
News > Deals
FCC mulls AOL-TWX deal
January 3, 2001: 8:31 p.m. ET

Regulatory commission weighs final approval of mammoth media pact
graphic
graphic graphic
graphic
NEW YORK (CNNfn) - The Federal Communications Commission is mulling over the proposed $89 billion merger between America Online Inc. and Time Warner Inc., in the final regulatory hurdle before the merger of the leading Internet service provider and the entertainment conglomerate can be completed.

Though bruised by months of delays amid persistent opposition by competitors and stripped of more than half of its value thanks to plunging stock prices, the merger if approved -- still stands to create a distribution behemoth extending into everything from television and movies to Internet chat rooms and electronic mail.

graphicThe deal's fate now rests in the hands of the five members of the Federal Communications Commission, which is expected to announce a decision in the coming days.

An FCC spokeswoman said Wednesday she was not aware of any timetable for the completion of the commission's considerations. The spokeswoman noted that the commissioners do not have to meet in person to vote, although an open meeting is likely to occur next week.

Experts have said it is unlikely that the FCC, the government's watchdog for communications issues, would oppose the pact. One commissioner, Harold Furchtgott-Roth, has voted to approve the merger, according to published reports. Other commissioners are reportedly studying a draft order under consideration.

The commissioners have the right to change their votes should other members add further conditions.

graphicRepresentatives for each of the five FCC commissioners were not available for comment Wednesday.

Spokesmen for AOL (AOL: Research, Estimates) and Time Warner (TWX: Research, Estimates) declined comment. However, they noted that should the FCC approve the deal, the merger would likely close soon after perhaps within a day.

Shares of AOL and Time Warner rose Wednesday, joining an overall market rally inspired by the Federal Reserve's cut in short-term interest rates. AOL shares climbed $5.11 to $37.50, while Time Warner shares rose $6.37 to $56.27.

FCC mulling messaging issue

Officially, the agency can study the deal well into February, as it ponders sticky issues such as Interactive Television and AOL's instant messaging service, which allows computer users to send instantaneous text messages to each other at no additional cost.

Although several types of free messaging software exists, including those offered by Web rivals Microsoft Corp. (MSFT: Research, Estimates) and Yahoo Inc (YHOO: Research, Estimates), AOL dominates the field. But AOL restricts the system from working with competing instant messaging systems, citing concerns about security.

graphicThe merger has been in front of the FCC since March, but the agency stopped its "review clock" in October to await the outcome of the companies' negotiations with the Federal Trade Commission, the nation's antitrust watchdog.

FTC approval came in December, after the companies agreed to a series of concessions aimed at protecting competition in the high-speed Internet access business. Following the FTC decision, the Federal Communications Commission then restarted its clock this week.

Deal's value plunges

When AOL chairman Steve Case and Time Warner chairman Gerald Levin announced the deal Jan. 10, 2000, it was worth $164 billion, excluding debt and options. One tumultuous year later, it rings up at just short of $90 billion. The deal had dipped below $80 billion in value before Wednesday's mighty gains on Wall Street.

The new company will be 55 percent owned by AOL and 45 percent owned by Time Warner. The combination will boast an annual revenue stream topping $30 billion, and cash flow of some $14 billion.

The marriage provides AOL, which already boasts almost 30 million subscribers through its AOL and CompuServe Internet services, with high-speed broadband access to Time Warner's more than 13 million cable subscribers.

Further, it would create a unique distribution platform that links those Web surfers to a broad range of Time Warner media outlets, including Warner Bros. Studios, HBO, CNN, Warner Music, Time magazine and CNNfn.com. graphic

  RELATED STORIES

FTC approves AOL, Time Warner merger - Dec. 14, 2000

AOL and Time Warner to merge - Jan. 10, 2000





graphic