AT&T mulls Comcast offer

Leading US telecoms firm AT&T has indicated for the first time that it will seriously consider the surprise offer made by cable giant Comcast.

The cable television firm made an unsolicited $40.5bn bid for AT&T's broadband arm on Monday.

The question is whether Comcast's offer recognizes the right value

Michael Armstrong
AT&T Chairman

AT&T Chairman Michael Armstrong has now confirmed that the offer is on the table, but hinted that the price may need to be increased.

"While we have no current plans to sell our broadband business, Comcast's offer is serious. It recognizes at least some of the value that we created at AT&T Broadband. Of course, the question is whether it recognizes the right value," Mr Armstrong told the Greater Boston Chamber of Commerce.

When first approached by Comcast, AT&T said that it had no plans to sell its broadband unit.

End of AT&T?

Some Wall Street analysts believe that a sale would herald the demise of the AT&T brand.

"The big question since AT&T announced [its] break-up was which unit was going to be the first to be acquired," said Jeffrey Kagan, an independent telecoms analyst.

Michael Armstrong is considering the offer

"AT&T will cease to exist a year or two from now. All the pieces will be gobbled up and the AT&T brand name will be a nostalgic memory in the history of America business."

And, although a takeover of parts of AT&T was expected, the early departure of Mr Malone will not help improve opinion of the firm on Wall Street.

Jeffrey Wlodarczak, analyst at CIBC World Markets, said: "I think most people were expecting Comcast to wait until the spin-off was complete and then make a bid.

"It is a little surprising that they felt they needed to move more quickly. Comcast made no secret of the fact that they believed they can run these [AT&T] assets better."

Wrangling for power

AT&T had previously said that there was no truth in the reports that a price tag of $40.5bn value had been agreed.

The company also denied rumours that the two sides had reached an impasse over the proposed voting structure.

There were rumours that the Roberts family, which founded Comcast in 1963, wanted a disproportionate amount of control for their equity stake.

The Roberts family now owns just 2% of Comcast, but holds 86% of the voting control.

World's biggest

If a deal does go ahead, it would create the world's largest broadband business with 22 million subscribers.

The bid comes only a week after Comcast, the third ranking cable TV firm in the US, bought AT&T Broadband's Baltimore cable network for $518m.

John Malone: resigned

And it preceded by hours the spin off of AT&T's wireless division in the first stage of a plan which proposes splitting the telecoms giant into four quoted firms, of which AT&T Broadband would also be one.

The spin off is part of a radical restructuring of AT&T which sees it split into three separate divisions.

AT&T Broadband, already the sector leader in the US, includes cable operations and joint ventures such as the high-speed internet unit Excite@Home.

Any deal with Comcast is expected to face scrutiny from the US competition authorities.

Key resignation

The news comes on the day that John Malone, one of the best known figures in the US cable television market, resigned from the board of telecoms giant AT&T.

This sparked speculation that Mr Malone will himself bid for the broadband division.

But other sources say that his departure simply reflects his disapproval at the idea of a future deal with Comcast and of the price tag.

He was also known to be a critic of the restructuring programme, and was due to resign on 10 August, when his Liberty Media division was spun off.

Mr Malone - whose businesses were bought out by AT&T - was considered to be one of the most talented and creative forces within the telecoms giant.