AT&T and AOL set to agree truce?

Deal on Time Warner Entertainment could be round the corner...

The relationship between AT&T and AOL Time Warner - which has become increasingly strained over recent months - could soon be back on a happier footing. The two companies are currently involved in Time Warner Entertainment (TWE), but AOL Time Warner wants to take sole control of the business. It has proposed that AT&T give up its 27.3 per cent stake in the joint venture in return for shares in AOL Time Warner's cable business, Time Warner Cable, which, unilke TWE, is publicly traded. But the proposal has stalled as the companies cannot agree on the value of AT&T's stake in TWE. The two sides have appointed Bank of America to assess the worth of the TWE stocks and to suggest a compensatory payment for the swap. But yesterday, the companies asked Bank of America to withhold its opinion, giving rise to speculation that they could have reached a settlement. AT&T's stake in TWE is thought to be worth between $7.5bn and $9.5bn. AOL was prepared to offer AT&T the option of transferring its shares over to Time Warner Cable. The telco could then sell its stake to the public, according to AOL's plan. But AT&T is said to be unhappy with the proposal as the company will have to assume the risk of holding shares in a falling market. To soften the blow, the telco has demanded at least $1bn cash in compensation. Bank of America was originally appointed to assess the worth of the TWE stocks and is expected to advise AT&T to claim as much as $2.25bn. If AT&T remains unconvinced of the merits of the deal then it could force AOL to float TWE - a strategy the telco has been pushing hard for as a way to realise its investment. AT&T and AOL refused to comment on the details of the case. However, they confirmed discussions are ongoing.