AT&T in cable talks with AOL

AT&T and AOL are said to be in talks

In rejecting Comcast's unsolicited bid for its cable-television operations earlier this month, AT&T said its Broadband unit was worth far more than the $58bn Comcast offered.

AT&T's C. Michael Armstrong is considering broadband merger plans

AT&T's rebuff had the effect of putting its cable business - the largest in the country - up for sale.

Comcast's surprise offer also caused AT&T to rethink its plans to spin off its broadband arm, which was due to start issuing its own stock next month, and to examine other alternatives for the division.

Now, in an effort to fend off further unsolicited bids for its cable business, AT&T has begun talks with media giant AOL Time Warner to merge the two companies' cable operations, according to the Wall Street Journal.

New suitor?

The newspaper said that shortly after Comcast disclosed its bid, AOL and AT&T began talks.

AOL's co-chief operating officer, Richard Parsons, is representing the media giant in the talks with Michael Armstrong, AT&T's chairman and chief executive.

Gerald Levin, AOL's CEO, has also met with Mr. Armstrong at least once to discuss the matter, the newspaper also reported.

The planned spin-off was part of a radical restructuring of AT&T to split the firm into three separate divisions.

End of AT&T?

Some Wall Street analysts believed that the break-up of AT&T could lead to a series of takeovers and 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.

"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 American business."

In rejecting Comcast's offer earlier this month, AT&T said it intended to "explore financial and strategic alternatives relating to AT&T Broadband, including the previously announced restructuring plans".

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.