Opening the Gates

Who else will bid on AT&T's cable unit?

Whether Ma Bell likes it or not, AT&T Broadband is on the auction block, thanks to Comcast. Analysts predict it won't be long before cable and media companies-maybe even a certain software giant-start dangling their own offers in front of the AT&T board.

The list of interested parties is long and diverse: Viacom, News Corp., Walt Disney, Liberty Media, AOL Time Warner, Cox Communications and Charter Communications all have been named as potential bidders, either individually or in partnership.

But perhaps the most surprising candidate is Microsoft. The software maker's in-your-face Internet strategy is nothing new. But its broadband-access strategy is still up in the air, as a result of questionable strategic positioning (its snafu over set-top box technology) and bad investments (its strategic partnership with now-defunct NorthPoint Communications).

The lure of acquiring a cable network on par with AOL Time Warner's holdings--or at least controlling such a network through a partnership--may be too good an opportunity for Microsoft to pass up, said Cynthia Brumfield, president of Broadband Intelligence. "Microsoft has absolutely no distribution. They have no broadband platform, while AOL has Time Warner," Brumfield said. "Microsoft certainly views AOL as a competitor, and it will be looking for ways to even the playing field."

Microsoft likely would look to partner with Comcast if a bidding war raises the stakes, Brumfield said. Microsoft already holds an 11% stake in Comcast, as well as a small piece of AT&T. There's also precedence. In 1997, Microsoft and Comcast submitted an under-the-table bid for a 25% stake in Tele-Communications Inc., before AT&T eventually acquired the property.

Other likely candidates include a consortium of cable and media companies that would divide the AT&T Broadband's assets among them. But a fire sale on the unit's assets is unlikely, said Keith Kennebeck, analyst for The Strategis Group. "AT&T is pretty reluctant to sell the entire entity, so to bring in another [multiple systems operator] and divvy it up isn't likely," he said. "They don't want to do the deal if they aren't part of a larger corporate structure. They want to be part of the management."

But Comcast is clearly the front-runner, said Sharon Armbrust, an analyst for the Kagan Group. Aside from AOL Time Warner, no other cable company has the financial might to pull off the deal, and media conglomerates like Viacom, Disney and News Corp. lack cable experience.