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The BBC's Mark Gregory
"AT&T is the lumbering behemoth of US telecommunications"
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Monday, 9 July, 2001, 20:55 GMT 21:55 UK
Cable giant bids for AT&T Broadband
Comcast and AT&T logos
Cable television company Comcast has made an unsolicited bid for the broadband arm of the leading US telecoms firm AT&T.

Comcast, in a letter to AT&T chairman Michael Armstrong, said it would offer $44.5bn (31.5bn) for the broadband business.

The move, which would create the world's largest broadband business, follows months of talks between the two firms.

But AT&T said in a statement that it had "no plans" to sells its broadband business, the largest in the US, boasting 16 million subscribers.

"We recently had some informal conversations with Comcast at their request," the AT&T statement said.

"However, those conversations never led to any concrete proposals and there is no truth to the rumour that we agreed on valuation."

The firm added that it would evaluate Comcast's bid, and act "in the best interests of the shareholders".

'Higher value'

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.

Michael Armstrong, chairman, AT&T
Michael Armstrong: has overseen AT&T shake-up
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.

Comcast claims its offer gives AT&T shareholders "dramatically higher" value than will be achieved under current plans, an assessment agreed on Wall Street, where AT&T shares finished up almost 12% at $18.70.

Shares of Comcast fell 8.4% to close at $39.24 on Nasdaq, amid concerns that buying AT&T Broadband would hurt Comcast's earnings and that such a deal would face intense regulatory scrutiny, analysts said.

End of AT&T?

Comcast's move, nonetheless, came as little surprise to Wall Street analysts, some of whom believe that the offer heralds 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 America business."

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."

World's biggest

The merger of Comcast with AT&T Broadband would create the world's largest broadband communications company with 22 million subscribers.

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 is expected to face scrutiny from US competitiveness watchdogs.

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See also:

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BT could scupper AT&T restructuring
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