Excitement at home: @Home Network/Excite merger brightens AT&T's hopes

Redwood City, Calif., next-door neighbors @Home Network and Excite Inc. last week agreed to merge in a stock swap worth approximately $6.7 billion. Admittedly fueled by a competitive landscape including America Online's pending buy of Netscape and Yahoo!'s content dominance, officials from both companies said they like their new chances.

"The bottom line is we've built our platform around multimedia capabilities, and now we're bringing Excite to that platform," said Tom Jermoluk, chairman and CEO of @Home. "That's much different from releasing a press release about eventually having such a platform."

Excite brings to the table strong experience in personalized Internet services, said George Bell, CEO of Excite. With @Home's cable distribution agreements, the combined company will be able to deliver personalized services across multiple devices and to 60 million homes worldwide, Jermoluk said.

AT&T, through its possible buy of @Home's largest shareholder Tele-Communications Inc., would also benefit from the Excite agreement.

In a statement, AT&T Chairman and CEO C. Michael Armstrong applauded the combination. "This marks a new era of open choice and capability for consumers. You can count on AT&T WorldNet service, which already has a business relationship with Excite, to champion this new, 'allband' portal, while combining it with AT&T's IP and traditional communications services," he said.

AT&T WorldNet formed a marketing agreement with Excite last summer. AT&T and @Home, in addition to their relationship through TCI, agreed earlier this month to jointly develop an IP network using AT&T's dense wavelength division multiplexing backbone (Telephony, Jan. 11, page 10).

Though it's a "huge play" for AT&T in the Internet space, there's still a question about how @Home and Excite will synergize their user bases, said Jilani Zeribi of Current Analysis. "The enthusiasm for it needs to be tempered with the reality that the business model of a facility provider buying a content provider needs to shake out a bit first," he said.