Will Malone return?

The U.S. appeals court ruling that struck down cable ownership restrictions opened doors that probably won't stay open very long.

First, it made it possible that AT&T may not be forced to divest cable holdings to stay under federally mandated subscriber counts. It further made it possible that some group — perhaps partnered with Liberty Media Group chairman and AT&T board member John Malone — could scoop up AT&T's broadband holdings and mass them into a giant cable operation.

“If [the ruling] does stand — and I would be surprised if it does — it might be interesting to see what [Malone] does in the U.S. in terms of trying to assemble his own type of major conglomerate here,” said Keith Kennebeck, cable analyst for The Strategis Group. “I don't know how that will affect his dealings here by not being limited in the amounts of cable systems you can buy.”

The issue is likely moot, according to Lisa Pierce, a telecom services analyst with Giga Information Group, who believes “AT&T is just using this to buy some more time and recognizes the hell that's going to descend if [the court case is upheld and] all actually came true.”

Malone has shown no overt interest in the U.S. cable market other than occasionally sniping at the way AT&T CEO C. Michael Armstrong runs his businesses. Liberty recently bought a majority interest in Deutsche Telekom's German cable businesses.

Liberty's “big picture is the effort to build a cable communications industry in Europe,” Malone said.

But the appeals court ruling could change that.

“This absence of [an ownership] cap will spur new merger and acquisition activity in the cable industry,” Kennebeck said.

A Liberty spokeswoman, contacted for comment on the speculation, said the company is in a quiet period and “we're not doing any interviews.”

The Malone/Armstrong feud re-surfaced when Armstrong suggested in published reports that Malone might have to relinquish his board spot when AT&T divests Liberty. Both parties tried to calm things with Armstrong calling Malone “an outstanding contributor” and “a great intellect,” and Malone countered by saying he has “no difference with Mike Armstrong.”

It's more likely that Malone will leave the AT&T board than re-enter the U.S. cable market, an industry source concluded.

“The man is a Ph.D. in engineering, so he understood how bad his cable plant was when he talked Armstrong into paying twice the going rate” for Tele-Communications Inc. three years ago, said the source, who requested anonymity.