AT&T Delays Bidding


AT&T Corp. last week extended the deadline for bids for AT&T Broadband to Monday from Friday, as potential suitors scrambled to revise their bids after the cable unit changed some of its 2002 market estimates.

The bidding deadline was extended to Dec. 3 "at the request of the participants," said one source familiar with the matter. The extension was not due to new bidders entering the picture, the source added.

AT&T had previously set a Nov. 30 deadline for offers, mainly to give it time to sort out the proposals in order to make a decision by Dec. 31. AT&T chairman C. Michael Armstrong has said publicly that he would like to decide Broadband's fate by the end of the year.

But despite the deadline extension, several people familiar with the matter said that AT&T still intends to present the bids to its board of directors at its next scheduled meeting on Dec. 8. However, those same sources said that the chances of a final decision being made by the board on Dec. 10 would be highly unlikely.

What forced the extension was the revelation that Broadband would have to revise some of its "market targets" for 2002, which would, in turn, require potential bidders to alter their bids, those people said.

Just what those market targets are is a little unclear. Sources said it could run the gamut of Broadband's operations.

Broadband has been in play ever since Comcast Corp. made a $58 billion unsolicited bid for the cable unit in July. That bid, now worth about $54.2 billion, was rejected by AT&T in August as inadequate.

Since then, a number of potential suitors have entered the picture, including AOL Time Warner Inc. and Cox Communications Inc.

So far, only Comcast, Cox and AOL have signed the necessary confidentiality agreements to negotiate with AT&T. However, at least one company — Microsoft Corp. — is rumored to be interested in investing in the Broadband unit in an effort to keep it independent. Sources said AT&T would need between $3 billion and $5 billion from any such partners.

Sources stressed that the market revisions did not represent any major changes and were due mainly to the MSO's recent change in management.

In October, Broadband revamped its management team, replacing former president and CEO Dan Somers with ex-Continental Cablevision Inc. president William Schleyer. Schleyer brought in two other former Continental execs — Ron Cooper and David Fellows — as COO and chief technology officer, respectively.

As part of the management shift, Schleyer also had to look at market estimates for next year.

"The question was raised, 'Are these Bill's [Schleyer's] numbers?' " said one source familiar with the matter. "They wanted the new management team to sign off on the estimates."

After Schleyer looked at the estimates, some were adjusted, the sources said. However, it did not result in a radical change.

"Fundamentally, they gave them a weekend [extension]," said a source familiar with the matter. "You wouldn't do that if there was a major change."

But it did cause the participants to at least reexamine their bids. As one source put it, the revisions "changed everybody's view of life."

CIBC World Markets cable analyst Jeff Wlodarczak said whatever the AT&T revisions, they're unlikely to have a major impact on any potential bids.

"Realistically, you make your own estimates," Wlodarczak said. "The reality is, when you're buying something like this, what you're focused on is, 'What can I do as a combined entity, where are the synergies, where's the upside?' and what the other bids are. The next year, it's obvious what you have to do with AT&T — get the margins from well below the industry average to the industry average."

Several industry analysts have dismissed an AOL bid for Broadband because of the intense regulatory scrutiny involved in combining the No. 1 cable company with the No. 1 online service provider. But as the months since Comcast's July bid have passed, several observers have said that AOL's interest has intensified.

"Expect AOL to make a proposal on Monday," said one source familiar with the matter.