Cable mogul John Malone, AT&T; Corp.'s largest individual shareholder, resigned from the company's board Tuesday, a month earlier than planned, fueling speculation that he may join in the bidding for its cable business.
In his resignation letter, Malone said that because he had been excluded from the board's discussion of Comcast Corp.'s unsolicited $44.5-billion offer for AT&T;'s cable unit, "it seems appropriate that I accelerate my departure," according to sources who have the letter.
In the letter, Malone, who has been a harsh critic of AT&T; and Chairman C. Michael Armstrong, called Comcast's bid "insufficient."
Malone, who joined the board after AT&T; acquired his cable company Tele-Communications Inc., did not return phone calls Tuesday. Malone now runs cable programming concern Liberty Media Corp. as an AT&T; subsidiary. An official for Liberty Media said he would not comment for Malone.
The cable industry and Wall Street were abuzz Tuesday over the prospect that Malone, who has lost about $1 billion in paper value in AT&T;'s stock slide during the last year, might be putting together his own bid for AT&T; Broadband, the nation's largest cable provider. Some analysts say it would be classic Malone to sell something at a high price and buy it back at a discount.
But several sources close to the cable billionaire insisted that Malone has no intentions of making a bid, even though it would thrill AT&T; investors eager for a bidding war. They said Malone finds cable prices in Europe to be more attractive than those in the U.S. and is concentrating his acquisition efforts abroad.
But other cable operators, including Charter Communications Corp., are looking carefully at making a bid for the AT&T; properties, according to Wall Street and company sources.
Charter, the nation's fourth-largest cable operator, would make a bid if it could find the right strategic partner, according to one source close to the company. Another source close to computer billionaire Paul Allen, who controls Charter, said Comcast's unusual bid could pressure the AT&T; board into putting the cable unit up for auction.
"We're capable of bidding for the whole thing," said the source, acknowledging Charter's high debt level.
One source close to AT&T; said that should the company be willing to sell its cable unit, there would be broad interest.
AT&T; shares have been climbing since Comcast's bid Sunday, in part because the company may be considered a takeover target and a bidding war could ensue. AT&T; shares rose $1.94, or 10%, to close at $20.64 on the New York Stock Exchange on Tuesday.
AT&T; has said it is not interested in selling AT&T; Broadband, but it will evaluate Comcast's offer. It said it intends to proceed with a previously announced plan to spin off the cable unit late this year as part of a broad restructuring of the ailing telecommunications giant.
AT&T; has suffered from a declining long-distance telephone business, weak earnings and a sagging stock price since it entered the cable business two years ago.
Malone, who joined the board in 1999 after selling his cable company to AT&T;, had planned to resign Aug. 10, when Liberty Media is scheduled to be spun off as an independent company.
Malone and four other departing AT&T; directors were excluded from discussions of Comcast's proposal at last month's board meeting, according to sources close to the company. AT&T; did not want confidential information disclosed to board members who would not be part of the ongoing discussions of the bid, according to an AT&T; source.
The first of those discussions will occur next Tuesday and Wednesday, at AT&T;'s regularly scheduled board meeting, according to sources close to the company.
The four other board members resigned Monday to become directors of AT&T; Wireless, which was spun off from the parent company into an independent public entity this week.
Comcast launched an unorthodox bid for AT&T; Broadband on Sunday after talks with AT&T; Chief Financial Officer Chuck Noski broke down over issues of price and control.
The offer initially was valued at $44.5 billion, not including assumed debt of about $13.5 billion, but fell to $40 billion as Comcast's stock has dropped since the announcement. Shares of Philadelphia-based Comcast declined 50 cents to close at $38.45 in Nasdaq trading Tuesday.
Malone and other board members are looking for a higher price and certain protections typically built into all-stock deals such as Comcast's.
"As an AT&T; shareholder, I find the Comcast offer insufficient," wrote Malone in his letter of resignation to Armstrong. He said that any Comcast deal also should include the two stakes AT&T; picked up as part of its cable acquisitions: a 30% stake in Cablevision Systems Corp. and a 25.5% interest in an AOL Time Warner Inc. partnership that holds cable systems, Home Box Office and the Warner Bros. studios.
Comcast said it would consider buying those assets but that the $44.5-billion offer was only for AT&T;'s 13.5 million subscribers.
Sources close to AT&T; say the board is looking for a price in the $60-billion range that would value AT&T; subscribers at $5,000 each, or more. Comcast's offer values customers at about $4,000 apiece.
A $60-billion price would allow AT&T; to come closer to its investment in cable. AT&T; spent about $110 billion in two consecutive cable acquisitions--Malone's Tele-Communications Inc. and MediaOne Group. Its strategy was to prop up its eroding long-distance telephone business by selling a host of services over cable wires, including phone calling, television and high-speed Internet data.
AT&T; has since sold off about $20 billion in nonstrategic assets that came with those two deals, including international cable systems, wireless cable technology and U.S. subscribers outside the major cities it serves, which include Los Angeles, San Francisco, Seattle, Boston, Denver and Atlanta.
AT&T; has plans to dispose of its stake in Time Warner Entertainment, valued at more than $10 billion, and in Cablevision, valued at about $4 billion.
Malone and other board members also object to allowing the Roberts family that controls Comcast to have total control over the cable company.
"To run a company the size of AT&T;, whose shareholders are widows and orphans, with this kind of structure is unconscionable," said a source close to the board. Under Comcast's proposal, the Roberts family would have 2% of the equity but 43% of the voting control, down from the current 85%. "A company this broadly held, you could control with 15% of the vote," the source said.
Malone and Armstrong have been at odds nearly from the start of their partnership over strategic direction of the company. Malone favored splitting cable and other fast-growing AT&T; businesses into a tracking stock two years ago to allow investors with a higher risk threshold to participate in the company without having to buy into the mature long-distance business.