Time-Turner pact in doubt

The media deal of the decade - the proposed marriage between Time Warner and Turner Broadcasting System (TBS) to create the world's largest media company - is the object of renewed speculation on Wall Street that it is about to fall apart.

The first doubts about Time Warner's pact with TBS, owned by Ted Turner, surfaced after Michael Fuchs, the former head of Time Warner Music, suggested last week that the deal had only a 50 per cent chance of surviving scrutiny by US government regulators.

Gerald Levin, the chairman and chief executive of Time Warner, responded - on a talkshow broadcast by the CNN news channel, the jewel in TBS's crown - that he remained confident that regulators would not block the marriage.

The two mega media deals of last year - the mergers of ABC with Disney and of CBS with Westinghouse - have since secured government approval. Both would be eclipsed by the Time Warner-TBS tie-up.

Mr Fuchs, who is suing Time Warner over the size of his pay-off after his dismissal last year, said he considered the chances of the Time Warner deal actually happening at a mere "50-50", although he conceded that he was basing his assessment on an "uneducated guess".

A collapse of the deal would be a devastating blow to Mr Levin, who has struggled to impress Wall Street since taking over at Time Warner in January 1993 after the death of his fabled predecessor, Steve Ross.

Saddled with debt, Time Warner has failed to boost its stock market value - it has declined by 40 per cent against the Dow Jones Industrial Average since 1994.

The Federal Trade Commission (FTC) in Washington is understood to be studying the deal for anti-competitive problems. Of greatest concern is the role of Denver-based Telecommunications Inc (TCI), America's largest TV cable company, which is headed by the cable mogul, John Malone.

Through his Liberty Media Company, Mr Malone currently has 20 per cent of the TBS stock and would emerge from the deal with a 9 per cent share in the new Time Warner. Since Time Warner already occupies the number two slot among US cable companies, this has triggered criticism that Time and TCI combined would be able to restrict competition in the US cable industry.

In the meantime, Time Warner is fighting a lawsuit challenging the TBS deal from US West, the telephone cable company.

US West, which has a 25.5 per cent stake in Time Warner Entertainment, is contending that Time Warner was in breach of contract by pursuing TBS without securing US West's blessing first.

Speaking as a guest on CNN's Larry King Live talk show, Mr Levin said he was confident that the quarrel with US West would be settled.

"Our dispute came out of an unfortunate contract-interpretation problem," he said. "We'll put all this acrimony behind us."

On the TBS deal itself, Mr Levin said he had "no fear" of the regulators in Washington.

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