AT&T's $51.5 Billion Bid for MediaOne Faces Challenge from Comcast and Microsoft

AT&T's aggressive bid for MediaOne, a cable operator with 500,000 customers, has left other bidders just five days to top the offer, valued at $51.5 billion. The deal, announced last month, has sparked a heated competition among potential buyers, including Comcast and Microsoft. However, many industry analysts and executives doubt that either Comcast or Microsoft will mount a strong challenge against AT&T, the nation's largest long-distance provider. Comcast, the nation's fourth-largest cable operator, is at a disadvantage due to its smaller size and limited financial resources.

Key Takeaways:

• AT&T's bid for MediaOne, valued at $51.5 billion, has given other bidders five days to top the offer.
• Comcast, the nation's fourth-largest cable operator, is struggling to mount a counterbid due to its smaller size and limited financial resources.
• Microsoft Corp. and America Online have signed confidentiality agreements with MediaOne, enabling them to join Comcast in a counterbid or mount their own offers.
• Industry analysts and executives doubt that either Comcast or Microsoft will challenge AT&T, citing the significant financial resources and influence of the nation's largest long-distance provider.
• Comcast has approached Microsoft, America Online, and Charter Communications about partnering in a counterbid, but analysts say this path is complicated and unlikely to succeed.
• The breakup fee agreed upon between MediaOne and Comcast is $1.5 billion, worth $5 per share for Comcast stockholders.
• Charter Communications, controlled by Paul Allen, may join a counterbid, but its involvement could jeopardize an initial public offering planned for later this year.
• Microsoft, which dominates the office computing world, sees America's living rooms as its next big frontier and is eager to broaden its influence in the cable industry.

Statistics:

• MediaOne has over 500,000 customers.
• AT&T has influence over 22 million subscribers.
• Comcast's current investor, Microsoft, has put $1 billion into the Philadelphia-based cable company over the past two years.
• Charter Communications has been on a cable-buying spree over the past year, acquiring several companies to fulfill its founders' vision of a "wired world".
• Comcast's breakup fee with MediaOne is worth $5 per share for Comcast stockholders, amounting to $1.5 billion.

Sources:

• The Los Angeles Times (citing unnamed sources close to AT&T)
• The Associated Press
• Bloomberg News