AT&T; Says Cable Unit Might Not Be Sold After All

AT&T; board members wrapped up a weekend meeting Sunday by instructing management to continue talks with potential suitors for its cable television operations.

However, in a statement the board warned it might not sell AT&T; Broadband, the nation’s largest cable operator, after all. The telephone and cable giant still could go forward with an earlier plan to spin off the cable division as a separate company serving 13.7 million subscribers.

AT&T;, which is looking to pay down an estimated $50 billion in debt, accepted the latest round of bids for the cable unit a week ago from Cox Communications Inc., Comcast Corp. and AOL Time Warner Inc.

AT&T; hopes to make a decision on the fate of AT&T; Broadband by the end of the year, Eileen M. Connolly, AT&T;’s spokeswoman, said Sunday.

Each of the proposals offers a different structure, 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.

The bidding process started in July after Comcast, the country’s third-largest cable operator, made a $41-billion hostile offer for AT&T; Broadband.

Microsoft Corp. also might increase its stake in AT&T; Broadband in an effort to fend off AOL’s bid for the entire unit or for clusters of AT&T; cable subscribers.

A successful bid by AOL Time Warner, the nation’s second-largest cable company, would give it leverage in its negotiations with cable operators to carry its Internet service on their high-speed networks and undercut Microsoft’s MSN service.

Federal regulators and Congress probably would scrutinize a decision to sell to AOL Time Warner because the combined company would have nearly 29 million subscribers and control about 40% of the U.S. market. The Comcast bid also would create an enormous cable operator with 23.7 million subscribers, which would be nearly twice the current size of Time Warner Cable, which has 12.8 million subscribers.

Consumer groups fear the possibility of a cable monopoly. However, the Supreme Court a week ago refused to consider reinstating government restrictions on the number of subscribers that cable companies can have.

AT&T;’s statement on Sunday said the board would “evaluate the potential of all proposals to create long-term shareowner value, but cautioned that there could be no guarantee that it would enter into a transaction for AT&T; Broadband.”

On Friday, AT&T; stock closed down 40 cents at $17.68 on the New York Stock Exchange.