At Least 4 Submit Bids for AT&T; Broadband

At least four companies met AT&T; Corp.’s deadline Monday night for submitting bids to acquire or invest in the telecommunications giant’s troubled cable unit, according to people close to the situation.

AOL Time Warner Inc., Comcast Corp., Cox Communications and Microsoft Corp. submitted offers, which are expected to be evaluated by the AT&T; board this weekend.

Few details about the bids could be learned in what has become a closely held contest for the nation’s largest cable company, AT&T; Broadband. But many cable industry executives with ties to AT&T; Broadband are betting that the company remains independent unless one of the bidders improves significantly upon the unsolicited$40-billion offer submitted in July by Comcast. That offer was rejected by the AT&T; board as inadequate.

AT&T; has said it plans to resolve the issue by year’s end.

Speculation that AT&T; Broadband would not be sold has gained momentum since October, when AT&T; chief C. Michael Armstrong pushed out his handpicked cable chief, who had little industry experience, in favor of three respected cable veterans.

The new management team helped AT&T; blunt Comcast’s pitch to Wall Street that its experienced management team, with some of the top margins in the business, was better equipped to turn around the fortunes of AT&T; Broadband.

AT&T; Broadband’s profit margins have deteriorated steadily over the last two years, from the 40% range to below 20% this summer.

One reason for the deterioration is AT&T; Broadband’s aggressive push into the local phone business using cable lines.

After rejecting the Comcast bid as inadequate, Armstrong pursued other alternatives. Among them is an equity investment from Microsoft, which is eager to see its software used in cable set-top boxes.

Despite an investment of $5 billion in AT&T; as part of the telecommunications company’s purchase of cable operator MediaOne Group, Microsoft has yet to secure any orders for its software.

Yet Microsoft is proposing to inject $3 billion or so in the cable unit, hoping to solidify its position in AT&T; set-top boxes.

Sources close to the negotiations say Comcast has sweetened its bid, but probably not enough to hold sway with the AT&T; board.

AOL Time Warner is said to have submitted a proposal to merge its second-ranked cable group into a spun-off AT&T; Broadband. But sources say AOL has put so many caveats into the deal that the board could find it too risky to pursue.

Cox is considered a dark horse in the bidding. Too small to acquire AT&T; Broadband, the company is proposing to merge and operate the resulting entity, which it would control with some 26% of the equity.