The bids are apparently in, so the chess match over AT&T Broadband could be ending soon.
According to sources familiar with the situation and published reports, AT&T Broadband received bids from three different suitors: Comcast Corp., AOL Time Warner Inc. and Cox Communications Inc.
Microsoft Corp. has also been named as willing to back Comcast and Cox in their bids for the Broadband unit, or to invest between $3 billion and $5 billion in the cable operation if AT&T decides to move ahead with its initial plans to spin the MSO off into an independent entity.
Microsoft's prime motivation appears to be keeping AOL from increasing its dominance in the cable industry. An AT&T Broadband-AOL Time Warner merger would create a cable giant with 27 million subscribers, plus AOL's 30 million Internet-access subscribers.
Last week, Microsoft CEO Steve Ballmer told the Washington Post
that the company was talking to all of the bidders for Broadband, except AOL.
"I don't suspect we'll partner with AOL," Ballmer told the Post.
AT&T's board of directors was slated to meet Saturday (Dec. 8) to look through the proposals. But the review could easily take more than a day. According to people familiar with the situation, AT&T required each bidder to submit extremely detailed bids, numbering about 300 pages each.
AT&T chairman C. Michael Armstrong has said publicly that he expects Broadband's fate to be decided by the end of the year.
None of the participants were willing to talk about their bids, citing confidentiality agreements they were required to sign. But at last week's UBS Warburg Media Week conference in New York, AOL chairman Steve Case admitted that his company was an interested party.
"It is in our strategic interest to be engaged in any action of significance in the cable industry," Case said. "We own cable operations and cable networks and AT&T has an economic interest in Time Warner Entertainment. We certainly define ourselves as an interested party."
In an interview on Cable News Network last week concerning his pending retirement, AOL Time Warner CEO Gerald Levin was a little more forthcoming.
"We have made a submission," Levin told Moneyline
anchor Lou Dobbs. "And I think we'll now see what the next step is."
AOL is reportedly proposing a deal where AT&T would spin off the Broadband unit and merge it with Time Warner Cable. To keep the transaction tax-free, AT&T shareholders would have to own at least 50 percent of the combined entity, but AOL would have operating control.
According to sources, Comcast's bid is not much different than the initial $54 billion offer it made in July. AT&T's board rejected that bid as inadequate.
An investment banker familiar with the situation said that Comcast hiked its bid by between 5 percent and 10 percent, mainly by offering to acquire AT&T's 26 percent interest in TWE.
Little is known about the Cox bid, although some industry observers say a Cox-AT&T Broadband merger would offer a means for Armstrong to save face. Cox is the only other MSO that has aggressively rolled out cable telephony, the main reason why AT&T entered the cable business in the first place.
Also, several sources familiar with the situation said Cox's largest shareholders — the Cox family — are more open to a deal that would reduce their holdings. In the past, the family has been loath to engage in such dilutive deals.