Comcast has 2 days to land MediaOne

Cable operator says it will accept AT&T bid unless it's topped


May 04, 1999|By BLOOMBERG NEWS

ENGLEWOOD, Colo. -- MediaOne Group Inc. said yesterday that it will sell itself to AT&T Corp. for $62.5 billion unless rival cable television company Comcast Corp. comes up with a better offer by Thursday.

MediaOne, the fourth-largest U.S. cable system operator, accepted a $52.53 billion offer in March from Philadelphia-based Comcast, which was topped by No. 1 U.S. phone company AT&T's bid April 23. AT&T declined to comment.

Comcast, the third-largest U.S. cable company, is trying to enlist Microsoft Corp. and others to help sweeten its bid for MediaOne. Microsoft co-founder and billionaire investor Paul Allen, who is creating his own large cable company through acquisitions, also is talking with Comcast, a person familiar with the talks said.

CNBC reported yesterday that America Online Inc. has dropped out of talks about joining a new Comcast bid. AOL declined to comment on the report.

"I wouldn't be surprised to see them [Comcast] come back," said Mary Kukowski, a cable analyst with Independent Communications Research. "They have a little bit of wiggle room on what they can offer."

AT&T is offering $30.85 in cash and 0.95 of a share of AT&T common stock for each MediaOne share. Comcast offered 1.1 shares of Comcast nonvoting Class A shares for each MediaOne share, and now it is seeking partners to boost the offer. The winning bidder will take over a large cable operator that has been aggressive in entering new markets such as local phone service.

MediaOne said the AT&T offer was a "superior proposal."

"We've got till Thursday to respond," Comcast Treasurer John Alchin said. "That's in accordance with the merger terms we had with MediaOne."

MediaOne shares fell $1.75 to $79.88 yesterday. AT&T rose 63 cents to $51.13, while Comcast rose $3.17 to $65.94.

The cable TV industry is undergoing rapid consolidation as companies seek economies of scale to offer more channels as well as telephone, Internet and other interactive services. Moreover, Allen and companies like AT&T have identified cable systems as having the best high-speed, or broadband, access into U.S. homes.

Comcast is expected to huddle with Allen, Microsoft and others to decide whether to make a competing bid.

"It looks like we might have a bidding war on our hands," said Jeffrey Kagan, an independent telecommunications analyst in Atlanta.

AT&T bought No. 2 U.S. cable operator Tele-Communications Inc. this year so it can offer local telephone service over cable lines along with traditional pay-TV service and new offerings, such as high-speed World Wide Web access.

AT&T, the largest U.S. long-distance carrier, wants to gain access to more homes and the $100 billion local phone market. Both Kagan and Kukowski said they believe that AT&T is willing to pay more for MediaOne because of its strategic value.

"Even if they pay more than what shareholders believe it's worth today, they'll do it because they're looking at this on a future basis," Kagan said.

Pub Date: 5/04/99

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