US telecommunications regulators yesterday fired a warning shot at AT&T, the world's biggest communications company, about its proposed $58 billion (€88 million) take-over of MediaOne, the country's third largest cable operator.
"This is a complex transaction," said Mr William Kennard, chairman of the Federal Communications Commission. "Because of its size and reach and the many novel legal and policy issues involved, this proposed merger warrants very careful scrutiny."
The commission can block mergers or impose conditions if it concludes a deal is not in the public interest or harms consumers or other market players.
The acquisition of MediaOne would make AT&T the biggest cable operator in the US, reaching 25 million homes, or one quarter of all US households, following its earlier $48 billion take-over of Tele-Communications Inc., another cable company. TCI, along with Independent Newspapers, owns Princes Holdings.
Mr Kennard's short statement contrasted sharply with his remarks last year, when he welcomed AT&T's purchase of TCI.
AT&T's deal with MediaOne was swiftly followed by an agreement by Microsoft, the world's biggest software supplier, to spend $5 billion on buying a 3 per cent equity stake in AT&T. They intend to co-operate in using cable systems to deliver interactive digital services to millions of television viewers. They also have the British cable market in their sights.
Yesterday, it emerged that Liberty Media Corp, an AT&T associate company, holds a 21.7 per cent stake in Telewest, one of the UK's biggest cable operators. As part of its deal with AT&T, Microsoft will acquire a 30 per cent stake in Telewest held by MediaOne. Yesterday, Liberty said Microsoft's involvement would accelerate consolidation within the British cable industry.
Ms Miranda Curtis, president of international operations for Liberty, said Microsoft would strengthen Telewest's position in merger talks with Cable and Wireless Communications, another of the country's top three cable operators.
"We remain totally committed to our investment in Telewest and to the consolidation in the UK cable industry," Ms Curtis said. "We believe Microsoft's investment in Telewest will only help to accelerate that process."
Microsoft also holds a 5 per cent stake in Nasdaq-quoted NTL - which has just bought Cablelink - the third biggest operator which is also keen to play a role in consolidation.
