NEW YORK -- AT&T; Corp. Chairman C. Michael Armstrong raised his bet on Internet-access provider Excite@Home Corp., buying another year to convince his two biggest cable partners that the company will meet growth goals.
Comcast Corp. and Cox Communications Inc. agreed to let Excite@Home deliver Internet content through their cable television lines beyond June 2002. In return, AT&T;, which owns a 56 percent voting stake in Excite@Home, gave Comcast and Cox the option to sell their Excite@Home stakes to AT&T; for as much as $3 billion next year.
The extension of the Cox and Comcast distribution contracts through 2006 and AT&T;'s willingness to boost its voting stake in the company helped lift Excite@Home shares 9.8 percent. They had tumbled 57 percent in the past year, partly because investors feared Excite@Home would lose business to rivals such as America Online Inc. if its contracts with the cable partners ended.
"The doubt before was, would AT&T; divest its stake in Excite@Home?" said Abhishek Gami, an analyst with William Blair who has a "long-term buy" rating on Excite@Home. "There are no doubts about it" now.
Shares of Excite@Home, which also scrapped a plan to issue a tracking stock for its media properties, rose $3.375 to $37.6875 on the Nasdaq stock market. It was the second-most active U.S. stock yesterday, with 33 million shares changing hands.
AT&T;, which is set to become the largest cable operator with its pending purchase of MediaOne Group Inc., rose $1.50 to $60.4375 on the New York Stock Exchange.
Comcast and Cox will extend their distribution contracts with Excite@Home through 2006, though they have the right to terminate them beginning in June 2001.
AT&T; said it will provide Excite@Home with access to its cable lines through 2008.
The extensions do not give Excite@Home exclusive rights to the Cox and Comcast networks, an Excite@Home spokeswoman said. Excite@Home will lose exclusive access to Cox, Comcast and AT&T;'s cable systems in 2002.
That means rivals such as EarthLink Inc. could pay Excite@Home and its cable partners for the right to offer their Internet-access services through Excite@Home's high-speed computer network. Excite@Home, Cox, Comcast and AT&T; would generate revenue by letting the third-party ISPs use their systems.
AT&T; offered to buy the shares Comcast and Cox hold in Excite@Home for a minimum of $48 each between Jan. 1, 2001, and June 4, 2002. Comcast and Cox each own about 30 million Class A shares, or about 8 percent, of Excite@Home.
The consolidation of AT&T;'s control over Excite@Home will make it easier for AT&T; to battle AOL for customers, analysts said. AOL will gain control of a rival cable Internet service when it completes its purchase of Time Warner Inc. this year.