Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Will AT&T Broadband Go It Alone?

By Ronald Grover It didn't take MSNBC's Chris Matthews long to get to the point. Moderating the opening session of the Western Cable show in Anaheim, Calif., on Nov. 28, the fast-talking host of Hardball fired one at William T. Schleyer, CEO of AT&T Broadband: "So, is it AOL Time Warner, or Comcast, or who?"

Matthews was trying to find out which of its several rumored suitors AT&T's cable company favors. Schleyer coyly responded with the noncommital, "I know we're loved by a lot of people these days."

Loved for sure. Cox Communications tried to prove its ardor with an offer on Nov. 27 of more than $40 billion. Comcast, which in July made an unsolicited bid of $40 billion, is expected to sweeten that proposal. AOL Time Warner is likely to join in the courting. Also rumored to be interested is Vivendi Universal, the French parent of Universal Studios. All of the companies declined to comment.

NOT SUCH A DOG. AT&T's board is scheduled to review the bids by Dec. 8. But if Wall Street whispers are to be believed, the phone giant isn't selling any time soon. In recent weeks, AT&T (T) Chairman Michael C. Armstrong hasn't been acting like a guy who's likely to carve off a piece of his company.

In October, he brought in Schleyer, who has a strong track record from his stint as president of Continental Cablevision. Schleyer is also a longtime associate of Amos Hostetter, the former head of Continental Cablevision who sits on AT&T's board and has been advising Armstrong on what to do with his beleaguered cable operation. Hostetter, by all accounts, might sell -- but only at a steeper price than Cox and Comcast are offering.

Moreover, AT&T's cable unit hasn't been acting lately like the dog many on Wall Street thought it was. Indeed, in AT&T's most recent earnings release, it said the cable outfit earned $602 million, a 59% hike from a year earlier. More important, its operating margins increased to 25%, from 18% a year earlier. And on Nov. 21, AT&T added an additional $10 billion in debt, bringing the company's overall load to over $40 billion. That's not something you do if you're looking to sell.

BACKWARD GLANCES. All of which may mean AT&T is back to the plan hatched earlier this year to spin off its cable division -- not to another company but to its own investors as a tracking stock. If that happens, watch for a lot of other cable players -- including the spurned suitors -- to go into a mating frenzy. Charlie Ergen's surprise deal on Oct. 28 to merge his EchoStar satellite-TV operation with that of competitor DirecTV has everyone else looking over their shoulders, because the combination would give Ergen control of more than 16 million cable subscribers. AT&T Broadband's block of almost 16 million subscribers would help any company dwarf the competition, but if it isn't for sale, everyone has to look elsewhere.

I figure that Comcast, which is run by the aggressive Roberts family, already has an alternative plan if AT&T turns down its offer. With 7.6 million subscribers, Comcast is in no-man's land. Yes, it's large enough to roll out new local services like telephone and Internet access in areas such as Maryland, Delaware, and Pennsylvania where it has huge systems. But it's too small to introduce national services, such as the new G4 video-game channel it announced on Nov. 28.

At another recent cable show, Ted Turner opined that in a few years perhaps just two cable companies will be left standing to fight it out with Ergen's satellite juggernaut. Turner figures Comcast would merge with Cox. Other industry observers say Comcast has been making eyes at Charter Communications, which has some 6.3 million subscribers. Microsoft co-founder Paul Allen, who owns Charter, says it isn't for sale.

NEW BALLGAME? I'm not buying that. Allen recently hired as Charter's new CEO Carl Vogel, a one-time satellite-TV operator who's far better known as one of John Malone's dealmakers. Malone's gospel, spread by his disciples, could be summed up as, "Have asset, will sell."

The buzz at the Western Cable show had Cablevision's founding Dolan family talking sale or merger with AOL Time Warner. Cablevision's 2.8 million subscribers -- nearly all located in metropolitan New York -- would be a nice fit for AOL, which has 1 million New York City subscribers among its 12.8 million customers. A deal like that makes a lot of sense -- though it would be hard to hammer out. Indeed, the two have been flirting for months. But Cablevision Chairman Chuck Dolan may now have more incentive to get out of the business, as he's among those actively bidding for the Boston Red Sox baseball team.

AT&T's intentions will be known soon enough. But no matter what the telecom giant does, a whole lot of lovin' will be going on among other cable operators soon. Grover is Los Angeles bureau chief for BusinessWeek. Follow his weekly Power Lunch column, only on BW Online

blog comments powered by Disqus