AT&T Buys Cable Giant TCI

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NEW YORK: At a little over $50 a share, AT&T is paying top dollar to drive Tele-Communications Inc.'s cable wires into local phone markets. That's 40 percent over what TCI stock was before the rumors of the deal started flying. AT&T is even soaking up TCI's $11 billion in debt along with the $37 million it's paying for the cable business -- but it's worth it, says TIME Wall Street columnist Daniel Kadlec: "AT&T needed this. It gives them a way to get into the local phone market that they couldn't figure out before -- and spares them the antitrust uproar that would have come if they had bought back a Baby Bell."

The move isn't risk-free, of course. AT&T has a habit of buying things just to keep up with the Joneses. It swallowed NCR to get into computers, which was a disaster. But Kadlec says the TCI purchase simply extends the company in a natural direction -- allowing it to re-enter the lucrative local phone market that it once dominated. "AT&T has finally solved a strategic problem that brought down its last two CEOs," said Kadlec. Whatever happens, TCI stockholders ought to be happy today: Shares jumped another $4 to $42 on Wednesday's confirmation of the deal.