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AOL-Time Warner vote delayed
November 9, 2000: 6:12 p.m. ET

FTC postpones critical approval vote by 3 weeks; legal action considered
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NEW YORK (CNNfn) - The U.S. Federal Trade Commission postponed a vote on whether to approve the blockbuster marriage between America Online Inc. and Time Warner for up to three weeks Thursday after the two sides failed reach agreement on certain conditions related to the merger.

The FTC, which was facing a Nov. 10 deadline to either approve the merger or take legal action to try and block it, announced its decision in an afternoon closed-door meeting where it considered "possible enforcement action" against the companies.

The federal agency said it agreed to the delay only after AOL and Time Warner officials made recent offers to address certain competitive issues related to the $118.4 billion merger.

AOL spokeswoman Kathy McKiernan said the companies "continue to have constructive conversations with the FTC and are on track to close the merger this fall." A Time Warner spokesman gave a similar statement.

Wrangling over details

Both AOL and Time Warner shares fell Thursday amid a broader market sell-off as speculation grew that the FTC would not give its blessing to the merger before its self-imposed Nov. 10 deadline.

AOL (AOL: Research, Estimates) shares ended the day off $3.62 at $52.68 while Time Warner (TWX: Research, Estimates), the parent company of CNNfn, fell $4.36 to $78.84. Both stocks have climbed in recent weeks as investor optimism grew that the transaction might soon receive a final blessing from U.S. regulators.

The companies reportedly continue to wrangle with antitrust officials over several conditions U.S. officials would like to place on the merger, most of them revolving around providing competing Internet service providers access to Time Warner's expansive cable lines.

The federal agency has drawn up a draft settlement requiring the companies to open up Time Warner's cable lines to at least three competitors within 90 days of offering AOL service via the network, according to the Wall Street Journal.

Specifically, antitrust officials are concerned that AOL, the No. 1 U.S. Internet-access provider, would get a leg-up on competitors by offering high-speed Net services in the cities served by Time Warner's cable networks.

This is the second time the FTC has granted a delay in the approval process to allow the companies to keep negotiating with its staff members. The first was a two-week delay that pushed its decision back to Friday, Nov. 10, a day the federal government is closed for the Veteran's Day holiday.

Still, the three-sentence release sent out by the agency Thursday afternoon announcing the most recent delay is the first time the five-member commission publicly has indicated it is discussing possible "enforcement action" against the firms -- the strongest indication yet that the FTC is serious about pursuing legal means to halt the merger.

graphicA source close to AOL and Time Warner said the companies are still very optimistic about closing the merger within the month, indicating a final resolution may be close at hand.

However, company officials have repeatedly hinted they would not agree to concessions that would hinder their ability to collect revenue from outside ISPs using Time Warner's cable lines.

Industry analysts largely played down the delayed vote Thursday, noting the apparent disagreements over the open access issue do not appear to have a substantial material impact on the deal's overall logic.

"The companies have expressed a commitment to have open access, it's just a question of how the regulators want to enforce that," said Mike Kupinski, an analyst with A.G. Edwards & Sons. "So I wouldn't read to much into the delay."

European regulators have already approved the merger. In addition to the FTC, the U.S. Federal Communications Commission must vote in favor of the deal, but that agency has delayed its decision until after the FTC makes a ruling and is widely expected to follow the FTC's lead. graphic


FTC said to call for new AOL-Time Warner concessions - Nov. 8, 2000

FTC pushes AOL Time Warner for open access - Sep. 4, 2000

Influential analyst says AOL-Time Warner deal to close by year's end - Oct. 16, 2000


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