RealTime IT News

Cablevision Battling AT&T

Cablevision Systems Corp. tossed a legal grenade into AT&T Corp.'s attempts to take control of Excite@Home Corp. cable operations.

Cablevision filed the lawsuit earlier this week in the Delaware State Court alleging breach of contract against Excite@Home , AT&T , Cox Communications Inc., and Comcast Corp.

AT&T Cable announced its plans to rearrange relations with each Excite@Home partner in March in order to acquiesce control of its cable operations. That deal was set to close Tuesday after a vote by Excite@Home shareholders, but finalizing the agreement has been delayed due to Cablevision's court action.

As a part of the original business realignment, Comcast and Cox struck separate deals with AT&T to facilitate the telecom giant's solo control of Excite@Home.

AT&T's relationship with Cablevision disintegrated when the Excite@Home deal was announced. The pact, which blindsided Cablevision executives, would allow AT&T to own a 74 percent voting stake in Excite@Home. AT&T currently has a 56 percent voting stake, but it doesn't have complete control of the firm because Comcast and Cox were granted veto powers in order to get them to approve of the deal.

In exchange for its increased influence, AT&T agreed to buy Comcast and Cox-owned Excite@Home shares to the tune of $1.6 billion in a cash or stock in 2001. Both cable companies would also get lucrative warrants to buy discounted shares of Excite@Home stock when they agree to distribute co-branded cable services through 2006.

AT&T also owns a 33 percent stake in Cablevision, but it has no operating control. Cablevision founder Charles Dolan and son James, own a majority of the firm. No lucrative terms or veto powers were extended to the Dolans.

While company policies prohibit both Cox and Comcast from commenting on pending litigation, an AT&T spokesman said the company thinks its arrangement with each entity is "fair to all concerned."

The same AT&T spokesperson acknowledged that the company does not believe it needs Cablevision's consent to take control of Excite@Home.

Excite@Home issued a statement declaring that the there is no legal merit to the suit and that the firm would defend the master distribution agreement extension signed with its cable partners earlier this year.

"There is no legal merit to Cablevision's claim. Excite@Home will vigorously defend this action. Excite@Home will move ahead as expeditiously as possible to complete the MDA Extension," the statement read. "The completion of the extensions reflects a corporate commitment that growing subscribers on high-speed cable Internet services is a key objective over the coming years."

According to Excite@Home the Cablevision suit contests the MDA extension because it constitutes an amendment to the Stockholders Agreement, to which Cablevision is a party. Cablevision contends that its consent is required for any such amendment.

Cablevision is seeking a temporary restraining order that would immediately bar the filing of a certificate of correction to Excite@Home's certificate of incorporation to amend its bylaws.

The lawsuit comes as AT&T is attempting to use the Cablevision's last-mile delivery systems in New York.

Scott Cleland, Legg Mason Precursor Group managing director, said Cablevision's lawsuit struck him as odd.

"It's a strange lawsuit because AT&T and Cablevision have cooperated in the past, with AT&T owning one-third of Cablevision, it's odd to see them file suite," Cleland said. It's hard to say w