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AT&T, Time Warner Strike Phone Deal

February 1, 1999

NEW YORK (AP) _ AT&T Corp. has struck a deal to offer telephone service over Time Warner Inc.’s cable systems in 33 states, greatly escalating the long distance phone company’s move into local service.

The deal comes as AT&T is close to completing its purchase of Time Warner’s biggest rival in the cable TV industry, Tele-Communications Inc.

AT&T had been widely reported to be talking with Time Warner about the possibility of offering phone service over its cable systems.

In the deal announced today, AT&T and Time Warner expect to begin offering the new service in one or two cities by the end of 1999 and begin broader commercial operations in the year 2000.

AT&T said today’s deal and its acquisition of TCI will give it the potential to supply local phone service to 40 percent of U.S. households over the next four to five years. In addition to phone service, the venture will offer interactive digital television and high-speed Internet service.

AT&T’s acquisition of TCI is expected to be completed this spring.

AT&T will own slightly more of three-quarters of the joint venture and Time Warner the rest, but AT&T will cover the cost of upgrading Time Warner’s cable TV lines to handle two-way communications. It also pay Time Warner an estimated $300 million for the right to supply local phone service.

The arrangement is expected to have annual sales of $4 billion after three years.

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