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AT&T, Charter Swap Cable Customers

AT&T Broadband, hoping to knit together a more cohesive cable network, signed a deal with Charter Communications Inc. Wednesday.

Even though the company is the largest cable owner in the U.S., with roughly 16 million customers, AT&T inherited a patchwork quilt of cable networks from acquisitions made in the past couple years, most notably its purchases of Liberty Media and MediaOne.

According to AT&T Broadband spokesman Steve Lang, the company is looking to cluster its cable network in major metropolitan areas of the U.S.

"We have a long-standing strategy to develop large clusters of customers in major metropolitan areas," Lang said. "This is just our company executing that strategy. We consider our network to be strategic or non-strategic; we're selling our non-strategic (network)."

In exchange for $500 million in common stock and 62,000 customers in Miami Beach and Sebastian, FL, Charter receives 574,000 customers in St. Louis, and areas of Auburn, Birmingham, Montgomery, and Selma, AL, and the Reno area in Nevada and California.

Jerry Kent, president and chief executive of billionaire Paul Allen's Charter Communications, said the deal rounds out service at its headquarters in St. Louis and reduces the number of headends it needs on the network.

"The customers we gain in Alabama will make us the leading provider in Birmingham, a top 40 market," Kent said. "As we interconnect existing Charter markets throughout Alabama with those we're acquiring from AT&T Broadband, we'll be able to reduce the number of acquired headends from 13 to three."

AT&T's purchase of MediaOne in early 2000 prompted the U.S. Department of Justice to require AT&T to divest its ownership in Road Runner service, the nation's second largest cable Internet provider.

Ma Bell already owns a controlling interest in Excite@Home, America's largest cable Internet provider.

The Federal Communications Commission added a caveat: either dump the Time Warner Entertainment interest, spin off Liberty Media's programming unit or sell off 10 million customers' worth of cable network.

The company has been scrambling to do all of the above to meet regulator approval.

AT&T, which owns 25 percent of Time Warner's cable network, has been trying unsuccessfully to sell back its stake. Principals for both companies have been in talks off and on for months, resulting in a stalemate.

It was reported by the Wall Street Journal that AT&T officials are unwilling to accept the $9 to $10 billion price tag AOL Time Warner officials have offered for AT&T's ownership stake. AT&T is threatening to put the stock on the market if AOL Time Warner officials don't budge.

AT&T also tried to spin off Liberty Media, but the IRS will ask for millions in taxes if officials try to make a move less than two years after its purchase.

And Tuesday, AT&T sold off $2.2 billion of its network to Mediacom Communications in the less populous areas in Georgia, Illinois, Iowa and Missouri.