AOL may seek AT&T cable
Associated Press
NEW YORK — AT&T has received at least two more offers for its cable television unit — the largest in the country — and anticipates receiving more before the company's board is scheduled to meet at the end of next week.
The board will decide which proposals are most promising and is expected to narrow the list in preparation for further negotiations, said a source close to the situation who spoke on condition of anonymity.
In a story on its Web site yesterday, The Wall Street Journal, said citing unnamed sources, said AOL has proposed merging AT&T Broadband with its Time Warner Entertainment unit.
The move had been expected for weeks by experts, who also predicted other suitors would submit offers.
AT&T spokeswoman Eileen Connolly declined to comment. AOL Time Warner spokesman Nicholas Graham said his company does not comment "on market rumors or speculation."
The scramble to stitch together offers for AT&T's cable business started in July, when Philadelphia-based Comcast Corp. made a $41 billion unsolicited stock swap bid that was rejected by AT&T as too low.
The Journal reported that AOL proposes buying a 40 percent stake in the unit, leaving AT&T with a majority.
An AOL-AT&T Broadband combination would give the AT&T division access to AOL's programming, broadcasting and transmission facilities.
AOL would get direct access to AT&T's broadband Internet pipeline.
Time Warner Cable is the country's second largest cable operator.
A combination of the cable operations of AOL and AT&T would create a cable giant with 28.9 million subscribers, likely facing heavy scrutiny by federal regulators and politicians concerned about an entity controlling about 40 percent of the market by some estimates.
"The fundamental argument is 'Do you want one cable operator with that type of dominance?"' David Farber, a telecommunications professor at University of Pennsylvania and the Federal Communication Commission's former chief technologist, told The Associated Press in July.
Comcast is the country's No. 3 cable operator. If it succeeds in buying AT&T's cable business, the result would be a cable operator with 23.7 million subscribers, dwarfing Time Warner.
A Comcast spokesman declined comment.
While regulatory scrutiny would be inevitable, the combination would create a company with less than 40 percent of the market, which would probably be approved in Washington, D.C., observers said.
Another possible outcome is for the broadband unit to be bought by a smaller cable outfit. But none have the financial wherewithal to cut such a deal, and would need a partner, analysts say.
Cable companies such as Cablevision Systems Corp., Cox Communications Inc. or Charter Communications could seek out a much larger firm with deep pockets — such as The Walt Disney Co., Microsoft Corp. or Viacom Inc. — to join in a purchase in return for an equity stake in the combined company.
Experts have said the consortium approach would probably pass muster with regulators, but could turn into an organizational nightmare.
The Journal, citing people familiar with the situation, reported yesterday that Cox is still interested in talking to AT&T, but has not submitted a formal bid. A Cox spokesman did not immediately return a telephone message seeking comment.
After Comcast made its bid, AT&T delayed its original plan to spin off the broadband unit as a standalone company.
AT&T could decide to reject all bids and go forward with the spinoff.
