FCC to AT&T: Make a decision

(Telephony) AT&T must shed its 25% ownership stake in Time Warner Entertainment unless it “immediately” commits to spinning off Liberty Media to satisfy the divestiture condition mandated for AT&T’s purchase of MediaOne, the FCC said in a letter released Monday.

The FCC letter was issued in response to AT&T’s announcement last week that it wants to spin off Liberty Media, if it could do so with a favorable ruling from the IRS. If the IRS rules against AT&T in the case—a ruling that could cost AT&T more than a billion dollars--the carrier said it would sell the Time Warner stake.

But regulators indicated that the conditional proposal to spin-off Liberty Media would not be accepted, noting that AT&T was bound to make an “irrevocable commitment” on the matter by the end of last week.

“The [AT&T proposal’s] clearest commitment appears to be its certification that AT&T will [divest of Time Warner Entertainment] … in the event it declines to divest Liberty,” the FCC letter states. “Thus, it appears that … AT&T has elected to divest TWE as the means for its compliance.”

If AT&T believes it will not divest its Time Warner stake by May 19, it must establish—by March 20--a trust arrangement to sell its interest in the media giant. AT&T reportedly had sought to sell the Time Warner stake for more than $10 billion but failed to find a buyer. In fact, AT&T Chairman C. Michael Armstrong even asked the FCC to intervene and force Time Warner to negotiate in good faith.

An AT&T spokesman declined to address the contents of the FCC letter.

“We are confident we are in compliance with the [divestiture] order,” an AT&T spokesman said. “Obviously, we are studying the letter carefully and plan to answer any further questions.”

Although the FCC letter asks for a response “immediately,” the AT&T spokesman said he was unsure of the company’s timetable to reply.