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The starting pistol has been fired and the race is on to build the Information Superhighway. Telephone companies, CATV providers, CAPs/AAVs, PCS licensees, electric utilities, and others all are jockeying for the pole position to lay the grid. In recognition of the fact the content is the key, significant emphasis has been placed on relationships with major movie studios, record labels and multimedia developers of interactive video games. Additionally, hardware manufacturers and software developers are gobbling each other up at a record pace. According to Broadview Associates, worldwide high-tech M&A (Mergers & Acquisitions) activity increased to $134 billion for 2,913 deals in 1995; 1993 figures were $90.5 billion for 1,816 deals. Through the first six months of 1996, Broadview tallied 1,624 transactions for a total of $125.7 billion [15-31]. The feeding frenzy is on, but not without some level of serious indigestion.
The following is a small, but representative sample of the scope and scale of such activity. (The author begs forgiveness in the event he failed to record the fact that one of these highly-touted deals fell apart. After all, marriages make headlines, while estrangements and divorces seldom merit a footnote in the announcements section.)
Bell Atlantic and Tele-Communications Inc. (TCI) announced in October 1993 a merger, which was called off in February 1994 for financial reasons. At that time, Bell Atlantic reached some 23% of U.S. homes; TCI passed nearly 40%.
Time Warner (content, CATV and publishing) announced the acquisition of Turner Broadcasting System (broadcast) on September 22, 1995. TCI (CATV) was the key to the merger, as it holds 21% of Turner voting stock; TCI gets extended rights to carry Turner cable networks, as well as the right to buy Turners interest in the SportsSouth regional sports network. US West, which holds a 20% stake in Time Warner, challenged the merger [15-32] and [15-33].
Disney (content) offered to acquire ABC/Capital Cities (content and broadcasting) for $19 billion. The merger produces a company with combined revenues of $18.7 billion. The Justice Department requested more information prior to approving the purchase [15-33].
TCI is acquiring (July 1995) Viacoms CATV business for around $2.25 billion. Viacoms coverage includes California, Washington, Oregon, Tennessee, and Ohio; 2.2 million subscribers are affected. Viacom will focus on other business; the company owns the MTV network and Paramount studios (so much for acquiring content). TCI is acquiring (July 1995) Western Communications, which Viacom was in the process of acquiring before it was acquired by TCI. Western Communications was owned by Chronicle Publishing Co., which owns the San Francisco Chronicle newspaper, KRON-TV and other smaller newspapers and TV stations.
TCI also proposes (July 1995) to acquire Intermedias systems in Santa Clara County, California. This is the third time that the deal has been structured. That deal has since taken the form of a swap of TCIs Nashville properties for the Intermedia properties in Santa Clara county. TCI also announced (July 1995) its intentions to link its various Northern California CATV properties with a digital fiber optic ring. It will also provide high-speed Internet connections, as well as telephone service (both wired and wireless) in concert with Sprint and other CATV companies. Additionally, TCI now owns about 24% of the U.S. cable market, with close to 14 million subscribers [15-34] and [15-35].
TCI became partners some years ago with Cox, Comcast and Continental Cablevision in the Teleport Communications Group (TCG) venture. TCG is a CAP, providing alternative access services in a number of major U.S. cities [15-7].
Bell Atlantic filed with U.S. Federal District Court in January 1994, for video communications waivers in connection with its plan to acquire Tele-Communications Inc. (TCI). The deal fell through, although Bell Atlantics waivers were granted in March 1995.
Microsoft made a run at Intuit (Quicken, QuickBooks and electronic banking) in 1995. The $2.1 billion deal fell through in May 1995, after objections from the U.S. Justice Department.
Pacific Telesis Group (PacTel) acquired in July 1995 Cross County Wireless for $175 million. Cross County Wireless offers wireless video and TV through a microwave distribution network. PacTel gained 40,000 subscribers in Riverside County, California. PacTel announced its intention to provide that service to five million households in Los Angeles, Orange and San Diego counties by the end of 1995. The system will support 100 channels, CD-ROM quality sound, and Video-On-Demand (VOD). According to PacTel, the system offers great appeal to people who arent happy with existing cable service [15-36].
Gannett announced in July 1995 the acquisition of Multimedia for $1.7 billion. Gannett owns 82 newspapers with a total circulation of 6.4 million. Multimedia owns 11 daily newspapers, 5 TV stations, 2 radio stations, Multimedia Cablevision, Multimedia Entertainment (Donahue and Rush Limbaugh TV shows) and Multimedia Security Service. In 1985, Gannet acquired The Detroit News and 5 TV stations. Gannett now owns 15 TV stations, 3 over the FCC limit of 12; some of those stations are in overlapping markets, which is prohibited by the FCC.
Time Warner Entertainment took a 10% stake in April 1995 in Interactive Digital Solutions, founded by Silicon Graphics and AT&T to develop hardware and software to support the Information Superhighway. Time Warners Full Service Network (FSN) trial in Orlando, Florida began with connections to 5 homes in December 1994; as of April 1995, that total was only 60 homesthere are potholes in the Information Superhighway [15-37].
Netscape Communications (WWW Browser) announced (September 22, 1995) its acquisition of Collabra Software Inc. (Internet networking software) for $108.7 million in stock.
AT&T announced in September 20, 1995 that it will break up into three companies and will sell AT&T Capital Corp., its captive financing business. The largest voluntary breakup in history is expected to be completed by January 1, 1997, splitting the $75 billion company into three market focused-companies. A one-time $7.5 billion charge-off will occur as a result. Approximately 8,500 employees, all in the Global Information Solutions (GSI) computer business, will lose their jobs. GSI was the result of the NCR acquisition, which did not live up to expectations.
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