AT&T Board Rejects Comcast Bid

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AT&T Corp.'s board of directors voted unanimously late Wednesday to
reject Comcast Corp.'s $54 billion bid for AT&T Broadband, opting instead to
explore 'other alternatives.'

In a terse
statement
issued Wednesday after market close, AT&T mimicked public
statements last week from chairman C. Michael Armstrong, stating that Comcast's
offer 'did not reflect the full value of AT&T Broadband.'

In an electronic mail to AT&T Broadband employees last week, Armstrong
said the Comcast bid recognized some of the value of the unit, but he questioned
if it was the right value.

Comcast responded that it viewed the AT&T board's decision positively,
adding that it did not agree that its offer was inadequate and it is willing to
continue negotiations.

'We are surprised that AT&T's board has yet to ask us for any further
information,' Comcast president Brian Roberts said in a prepared statement. 'To
that end, we remain prepared to hold immediate discussions with AT&T
regarding our proposal.'

According to its statement, AT&T's board was also concerned about the
voting structure of the Comcast deal. According to Comcast's proposal, AT&T
shareholders would have 51 percent voting control over the combined company, but
Comcast's Roberts family, with about 1 percent of the stock, would have more
than 40 percent voting control.

AT&T's board had been rumored to take issue with that disproportionate
structure. An eclectic mix of academics, financial executives, retired
industrialists and one former cable CEO, the AT&T board has been said to
strongly favor the concept of one share, one vote.

According to sources at AT&T, the company could entertain offers from
other companies, evaluate a revised offer from Comcast, or go ahead with plans
to issue a tracking stock for the AT&T Broadband unit.

'Mike [Armstrong] has acknowledged that there have been other overtures
made,' one source familiar with the matter said. 'Now they can explore those
overtures. Does that mean they would also entertain a revised offer from
Comcast? They certainly would.'

Comcast also said in its statement that it was prepared to sweeten its offer
by acquiring AT&T's stakes stake in Time Warner Entertainment, Cablevision
Systems Corp. and Rainbow Media Holdings Inc. by assuming more debt and issuing
more equity to reflect the value of the assets.

Some observers have placed a value of between $10 billion and $20 billion on
those assets.

Speculation has been wild since Comcast made its unsolicited bid July 8 about
possible competing suitors for AT&T Broadband, including AOL Time Warner
Inc., Cox Communications Inc., Charter Communications Inc., The Walt Disney Co.,
USA Networks Inc., Viacom Inc. and Vivendi Universal.

According to one MSO executive, by rejecting Comcast's offer, AT&T opened
the door for other potential suitors. But that could be difficult given the
potential tax burden of a deal. Any potential bidder would have to be smaller
than AT&T, but big enough to do the deal.

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