ANALYSIS: Media Watch - More than meets the eye to failed Comcastbid for AT&T Broadband

Comcast's hostile takeover bid for AT&T's television assets (AT&T

Broadband) was shot down on July 18 when AT&T rejected the financial

terms made by Comcast, which made the bid in the hopes of becoming the

nation's largest cable company.



Comcast's $53.4 billion bid was seen as a low-ball offer for a

business that AT&T had assembled after spending more than $100

billion on acquisitions.



While at first glance this might seem to be an open and shut case of a

failed takeover bid, reporters read between the lines to gauge the true

significance of the events surrounding the bid and its rejection.



In one statement, the firm rejected Comcast's bid. In another, it

announced it would create a tracking stock out of its cable assets

before spinning it off as an independent company. The company further

announced that it would seek "strategic alternatives" regarding its

cable business.



USA Today (July 19) interpreted this as "effectively putting (AT&T

Broadband) on the auction block." In addition to suggesting that Comcast

would raise its offer, the media named Cox Communications, AOL Time

Warner, Disney, and Charter Communications as potential bidders for AT&T

Broadband.



Media outlets honed in on the fact that in wording its rejection of

Comcast's bid, AT&T had notably omitted any kind of language that would

indicate it was opposed to the idea of selling AT&T Broadband.



The Pittsburgh Post-Gazette (July 19) focused on the wording of AT&T's

rejection to identify that it represented "a notable departure from the

company's initial resolve" not to sell the broadband division, and to

proceed with its plans to spin off AT&T Broadband. An analyst told

Reuters (July 18), "They are not rejecting all offers; they are not

rejecting additional offers; they are just rejecting this offer."



Oddly enough, on hearing AT&T's announcement, "Comcast declared victory"

(The Washington Post, July 19). The fact that Comcast had been able to

derail AT&T's restructuring plans was portrayed as a plus for Comcast,

even though its initial bid had been rejected. Comcast had received

substantial support from AT&T's investors with its preliminary bid. The

Financial Times (July 19) reported, "AT&T is effectively admitting that

shareholders are likely to favor a proposal such as Comcast's rather

than a tracking stock."



With AT&T investors on its side, Comcast was sensing that AT&T's options

were increasingly limited. All Comcast has to do now is outbid the

competition, and it feels confident it can do so. Analysts sharing their

opinions with the media seemed to agree. The Los Angeles Times (July 19)

quoted an analyst as saying, "No one (among the competition) wants

Comcast to have 22 million subscribers, but no one is in a position to

stop them either. No other company is in as good a position to bid as

Comcast."



The manner in which AT&T rejected Comcast's bid seems more likely to be

the start of a flurry of activity rather than the end of

negotiations.



As of now, the media is suggesting that Comcast has played its hand very

well, and could end up as the nation's largest cable provider. For its

part, AT&T may end up saving face for its misguided efforts into cable

if it can portray itself as having secured a higher value for its

shareholders.



Evaluation and analysis by CARMA International. Media Watch can be found

at www.carma.com.



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