Excite@Home, AT&T renegotiate optical deal

Cash-strapped Excite@Home said yesterday it would receive an $85 million cash infusion by renegotiating its optical-fiber capacity and future upgrades contract with AT&T.

The announcement comes just one week after the struggling Internet content and service provider raised $100 million in convertible notes sales. In a conference call to investors, the company said it is funded “well beyond the end of this year.”

In January 1999, the companies announced a 20-year, lump-sum deal to create an IP backbone capable of supporting more than 5 million broadband users. Under the terms of the adjusted agreement, Excite@Home agrees to pay AT&T $8.8 million per year for 18½ years at an 8% annual interest rate.

The deal pumps new financial life into the company, which said in April it needed $75 million to $85 million to continue operations.

“Given our short-term cash needs and the returns we expect to generate on money we invest in our business, we believe this transaction balances our cash needs,” said Excite@Home chairwoman and CEO Patti Hart. “We know the risks associated with this action and are aggressively managing those risks.”

Although rumors concerning Excite@Home possibly selling its foundering Excite Internet portal were not fulfilled, Hart said the company would entertain offers out of responsibility to shareholders. She also said the company will focus its efforts on integrating existing assets into the broadband application space as the company moves away from the media sector.

“I wouldn’t be surprised if there is a sell-off of Excite, or even a closure,” said Rob Lancaster, an analyst at The Yankee Group. “If somebody came to them tomorrow with the right price, they would move that operation.”

Earlier this month, Excite@Home closed its media portal operations in France, Germany and Spain.