AT&T said Wednesday that it plans to spin off Liberty Media, created as the programming arm of Tele-Communications Inc. (TCI) before that company was acquired by the telephone giant.

Liberty Media, which holds stakes in USA Networks, BET, Discovery Channel and other cable networks, now trades as an AT&T tracking stock and continues to be controlled by TCI founder John Malone.

The spin-off not only would satisfy Malone, who has strained at the reins of AT&T, but more importantly paves the way for FCC approval of AT&T's $58-billion acquisition of MediaOne.

The commission had previously conditioned approval of the deal on AT&T's spin-off of Liberty or a sale of its 25-percent stake in Time Warner Entertainment. AT&T said the spin-off would be contingent on a ruling from the IRS that the spinoff is tax-free.

Source: Studio Briefing