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AOL-Time Warner expects friendly vote
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June 22, 2000: 6:59 p.m. ET
Shareholders' OK of merger seen, but deal still must satisfy regulators
By Staff Writer Franklin Paul
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NEW YORK (CNNfn) - With regulators picking at their proposed merger with a fine tooth comb, and dissenting interest groups nipping at their heels, Time Warner and America Online must look forward to their shareholder meetings on Friday as a kind of big, comfy, group hug.
At separate gatherings on Friday, shareholders of New York-based Time Warner, the parent of CNNfn.com, and Dulles, Va.-based AOL will vote on the proposed marriage, the biggest merger ever -- valued now at about $125 billion, down from $164 billion when its was announced in January.
 Analysts predict the meetings, each scheduled to start at 10 a.m. EDT, will be rich with enlightenment on how the two companies will mix their somewhat disparate cultures, and give a glimpse of what this proposed combination of old and new media assets will look like in the years to come.
"The most important aspect of tomorrow's meeting is to get everybody on board and to understand the overall strategy of what they are doing," said Prudential Securities analyst Katherine Styponias.
But the vote itself is seen as little more than ceremonial. It will likely pass without incident, experts said.
"I think that what is expected, particularly from the Time Warner (TWX: Research, Estimates) point of view, is that shareholders are going to approve the deal," Styponias added. "The same is true of AOL."
Persuading regulators a far tougher challenge
A much tougher challenge comes as the companies continue to persuade federal officials that the combination of AOL (AOL: Research, Estimates), a dominant Internet access provider, and Time Warner, owner of a vast collection of print, entertainment and cable television assets, will benefit everyone, and not restrict access to competitors.
Analysts struggle to see any scenario where the government would stop the merger, but note that regulators might seek some kind of remedy to ensure the combined company's distribution channels remain open to other content providers.
Even though AOL has repeatedly pledged its commitment to open access, and would certainly like to be done debating the issue, dogged critics keep it on the front burner. What's more, several incidents keep the topic alive.
For example, on Thursday AT&T won a key victory in the battle over access to its cable network, when the U.S. 9th Circuit Court of Appeals overturned a federal judge's earlier decision that would have forced AT&T to lease space on its cable systems to competing Internet service providers.
Some experts interpreted the decision, which labeled cable-based high-speed Internet access a "telecommunications service," as an opening to regulated access under the same rules that force phone companies to share their networks.
Of course, still lingering in many minds - experts and laymen alike - is the debacle of early May, when Time Warner blocked the signal of Disney's ABC-TV network, amid a bitter dispute over rights. Though the matter was settled later in the month, Disney and other companies continue to lean on government officials to ensure open access be a condition of the merger's approval.
 Disney has said it believes the deal, which would create the world's largest media and Internet company, would birth an entity that could control the content offered through cable networks.
"(Time Warner) made it tougher on themselves since the whole ABC-Time Warner showdown," Prudential's Styponias said. "It hasn't painted them favorably in he eyes of regulators."
Regulators are also expected to look closely at AOL's dominance in instant messaging. A third area of concern is the potential links among AOL, Time Warner and No. 1 cable operator and phone giant AT&T, which has a stake in Time Warner Entertainment.
Following a federal antitrust inquiry into the prevalence of its instant messaging technology, America Online last week submitted a proposal to allow open access to its popular Instant Messenger system.
Regulatory approval seen in coming months
Overseas, the European Commission this week announced a four-month antitrust investigation into the merger. The EC, the executive arm of the European Union, said it feared the new company "will be able to dictate the technical standards for delivering music over the Internet." It also will study whether AOL could use its dominance of the United States to achieve dominance in Europe.
Despite all the attention being paid to the case, analysts still see the consummation of the merger before the end of the year.
"I don't think anybody anticipates any real problems with the regulators when all is said and done," said UBS Warburg analyst Kurt Billick. "It would take a lot to get the government to actively intervene to block this merger. Because it is very difficult to come up with a clear antitrust case. There would have to be a very imaginative definition of the public interest being harmed."
With so much contention in the air, AOL and Time Warner executives will surely look forward to more hugs than harm at the shareholder meetings on Friday.
"I'd be very surprised if there was an issue from the shareholders standpoint," Billick added. 
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