Broadcast 11th October 2000

	Listen to an interview with Don Bogler

The 135 billion dollar merger between American Online and Time Warner has been approved by the European Commission, now that AOL has promised to sever its links with German media group, Bertelsmann, and a proposed merger between Time Warner and EMI music has already been abandoned.

Analysts do not see these concessions as too damaging. However, the deal still has to be approved by American regulators who may well demand much greater sacrifices.

Don Bogler, who writes for the Financial Times' Lex comment column from New York spoke to our reporter Sally Hardcastle. He says both companies could be asked to give up significant power in the market:



"Time Warner is the second biggest cable company in the United States and under the current rules and the current merger agreement, only AOL would be allowed to offer internet access over Time Warner’s cable systems. The regulators want Time Warner to open its cable systems to other internet access providers.

"The second thing they want, is AOL dominates the market at the moment in so-called instant messaging, this is a competitive advantage for AOL, it is one of the things that makes people want to sign up with the service, there are other people who have the technology but AOL has so far dominated the market."

So they are going to be asked to drop those two things which means giving up an awful lot of what makes their business work. Sally Hardcastle asked Don Bogler if they going to give in to those demands?

"Interesting question, I think there are two very attractive things. I do not think that Time Warner really wants to open its cable systems unless it absolutely has to.

"I certainly think that AOL believes strongly that the market for instant messaging, which it has created, it should be able to keep for itself, however, this will be a real test of the merger. I think AOL still has more to gain than to loose from the merger because it desperately needs the content that Time Warner can offer.

I think AOL still has more to gain than to loose from the merger because it desperately needs the content that Time Warner can offer.Don Bogler

"At Time Warner it is a more interesting debate for the management. The AOL share price has fallen by more than 25 per cent since the merger was announced in January. There are other partners that Time Warner could seek out, there may be other people who could offer it a better deal.

"Perhaps, and this is purely speculation on our part, the Time Warner people would not be too sad if a regulatory block allowed them to walk away from the merger while saving some face."

What is your own gut feeling? asked Sally Hardcastle.

"My own gut feeling is that there is still a fairly large chance of it going through providing that the United States regulators do not ask for anything else in addition. But given how regulators are behaving more capriciously on both sides of the Atlantic these days, there is no guarantee that they are not going to throw in another condition or two, and it does make it a more and more complicated deal.

"It means that it is taking longer and longer to approve, the internet does not look quite as fresh and exciting as it did in January and the whole deal has a little bit of a dated feel about it."

Sally Hardcastle put to Don Bogler that investors seem to be taking a different attitude to it now.

"Absolutely, and if you look at what has happened to the share prices because Time Warner’s share price has been tied to the AOL stock which has been declining, it has massively under-performed its rivals, Viacom, News Corporation, Disney, and perhaps free of the AOL deal the Time Warner share price could perform much better."

Perhaps free of the AOL deal the Time Warner share price could perform much better. Don Bogler