AOL Time Warner is buying out AT&T's stake in its cable television and moviemaking partnership in a deal estimated to be worth $3.5bn.
The deal includes most of AOL Time Warner's cable TV systems and its Warner Bros. film studio, and its highly respected Home Box Office (HBO) channel.
The two sides have been discussing a deal for unwinding the partnership for some time.
Under the terms of the deal, AT&T will get $2.1bn in cash and AOL Time Warner stock valued at $1.5bn, as well as a 21 per cent stake in the Time Warner Cable business, in exchange for its stake in Time Warner Entertainment.
AOL Time Warner will get full ownership of Warner Bros. and HBO, along with stakes in the Comedy Central, Court TV and The WB Network television channels.
AT&T and Comcast have agreed to make America Online's high-speed version of its internet service available on Comcast's cable systems to give AOL access to more customers.
AOL Time Warner chief executive Dick Parsons said the deal was "the best possible outcome for our investors", and that it would simplify its overall structure.
"AOL Time Warner will recapture total ownership and control of its content businesses, enabling us to manage this portfolio of assets for maximum value. And all of the company's state-of-the-art cable assets will be combined for the first time into a well-capitalised, pure-play cable company," he said.
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