No AT&T-Style; Breakup Likely at Time Warner : Management: Restructuring seen as preparation for easing merger with Turner.

Many Wall Street analysts were quick to predict an AT&T-style; break up of Time Warner Inc. following the company’s restructuring announcement last week.

But sources close to the company said that such a scenario is unlikely and that the move is little more than a natural next-step in its consolidation of entertainment assets, a simplification in preparation for its acquisition of Turner Broadcasting System Inc.

The company last Thursday consolidated its Music Group into the existing Warner Bros. filmed entertainment unit. The studio already oversees television, motion pictures, animation, home video, retail stores, and in the last year has added the WB television network and the once-independent Six Flags theme park operation.

Eliminating the job of Michael Fuchs, who was head of the music group, and merging the division into Warner Bros. continues the consolidation while removing an internal critic of the merger, analysts say.

“The key is that they have finally made a decision to rationalize the business and to keep moving in that direction,” said John Tinker of Furman, Selz.

Some analysts believed that Time Warner was preparing to shed parts of the company that had held down share value, namely its cable business. But the company maintains that the restructuring neither advances nor sidetracks a promise it made to analysts in February to spin off its cable operation into a self-financing unit that would also absorb much of Time Warner’s debt. Wall Street has valued Time Warner’s stock in part because of a distaste for the capital-intensive cable business, which has drained cash flow.

The obstacle to that spinoff is US West, which owns 26% of a partnership that controls Time Warner’s studio, Home Box Office and the bulk of its cable operations. Time Warner has already cashed out two Japanese partners, but the regional phone company has resisted, keen on keeping programming assets for the cable systems it has been accumulating.

US West rejected exchanging a 26% interest in the partnership for a chunk of Time Warner cable subscribers this spring, and filed a lawsuit to block the merger with Turner, claiming that Time Warner would then favor Turner assets over competing partnership assets .

Both companies are now jockeying to settle the dispute before a March trial date. US West, which sources say is angling for a piece of Turner programming, has expressed objections to the recent Time Warner restructuring, claiming that it distracts studio heads Robert Daly and Terry Semel from managing partnership assets.

Time Warner, meanwhile, has held a series of talks over the last year with AT&T;, presumably about cross-promoting AT&T; long-distance and local telephone services and cable that Time Warner provides. While the Wall Street Journal reported Monday that those talks have heated up, sources close to Time Warner disputed such advances. Federal laws now restrict a long-distance carrier and a local phone company like US West from joint ownership, although one source suggested that AT&T; could help Time Warner buy out US West, and that changes in telecommunications laws could relax those barriers.