AT&T; Board Weighs Options for Broadband Operation

When he presents options to the AT&T; Corp. board this morning, Chairman C. Michael Armstrong may well try to maintain the independence of AT&T; Broadband to validate his unrealized and expensive cable acquisition strategy.

But investors say that doing nothing would hammer AT&T;’s already battered stock price and that the company should therefore try to appease investors by selling certain cable assets to shave its staggering $50 billion in debt.

After four months of negotiations with potential suitors and backers, AT&T; collected bids Monday from Cox Communications Inc., Comcast Corp. and AOL Time Warner Inc. People close to the board say a winner is not expected to be chosen this weekend because the bids are complicated and not easy to compare and will take time to understand.

Each of the bids proposes different structures, from a merger with an independent AT&T; Broadband in the case of AOL and Cox to an outright acquisition of the unit by Comcast.

AOL also proposes buying a limited number of AT&T; subscribers in an offer that many analysts, investors and industry executives give good chances. That is because part of the proposal calls for AT&T; to sell its 25% stake in a joint venture with AOL Time Warner. AT&T; could use the $12 billion to $16 billion in proceeds to pay down debt.

Investors say AT&T; also could strike a deal under which Microsoft Corp. invests $3 billion, further helping the telecommunications giant defray debt. AT&T; might get the money with few strings attached by agreeing not to merge with Microsoft’s archrival, AOL.

For AOL, getting control of AT&T; Broadband would provide leverage in its negotiations with cable operators to carry its Internet service on their high-speed networks. AOL could sell off valuable AT&T; cable clusters to cable rivals willing to carry its high-speed Internet offering. That would undercut Microsoft’s competing MSN service.

Analysts and investors agree that perhaps the best offer for AT&T; shareholders comes from Comcast because of its superior management team and the ease of regulatory approval of its proposed acquisition. But the hostile nature of its original offer this summer, they say, makes Comcast an unlikely victor.