AT&T WANTS $1 BIL FROM AOLTW

AT&T is seeking at least $1 billion in cash from AOL Time Warner as a condition for accepting AOL's plan for dissolving the Time Warner Entertainment joint venture, people close to the negotiations told the New York Times.

Responding to a request from the two companies, Bank of America is expected to deliver an opinion today on how much AT&T's stake in TWE is worth and on how much of that stake investors could be expected to buy in a public offering.

The paper says the bank's determination is meant to form a basis for additional negotiations as AT&T and AOL Time Warner try to unravel their venture, which includes HBO, the Warner Brothers film studio, music operations and most of AOLTW’s cable-TV systems. It is possible that AT&T and AOL could jointly ask the bank to suspend its judgement if the companies believe that they are close to reaching a side deal.

The bank is expected to estimate that AT&T's roughly 27.3% stake is worth from $7.5 billion to $9.5 billion. As important, however, the bank is also expected to predict that investors would be receptive to buying only a fraction of AT&T's shares.

AT&T and AOLTW have been trying for years to untangle the T.W.E. partnership. Frustrated by the pace of the talks, AT&T last year began the process of turning TWE into a public company.

AOLTW does not want TWE to go public; it wants to retain control over its core HBO and Warner Brothers divisions. Instead, AOL is trying to persuade AT&T to swap its interest in TWE for a stake in a newly created Time Warner Cable, which would include AOLTW’s cable systems. Under AOL's plan, AT&T would then sell its stake in Time Warner Cable to the public, the Times said.