Who will grab AT&T?

Much speculation begins on who might come in and carry off the MSO
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Clausewitz talks about the fog of war, how battlefield decisions "are wrapped in a fog of greater or lesser uncertainty." That's a pretty good description of the swirl surrounding AT&T Corp.'s fight against Comcast Corp.'s hostile pursuit of its cable unit. With the pace of action slower than many players and spectators would like, attention has turned to who might come in and snatch the nation's largest cable operator away from Comcast.

Depending on whom you believe, AOL Time Warner is staging its own bid for AT&T Broadband; Disney is teaming with two MSOs to beat off Comcast and run the pieces together; or one of the "many interested parties" that AT&T's Mike Armstrong claims have contacted him is about to appear out of the woodwork.

The problem is that there are few signs of imminent attack. Yes, Disney President Bob Iger publicly said that Disney might be interested in taking a run. But the supposed MSO consortium? Charter Chairman Jerry Kent's recent meeting with Iger was to resolve their dispute over ESPNews, which Charter has yanked off some systems, but they have had no lengthy discussions about teaming up for AT&T, Kent is telling associates. And Cox has had no recent conversations with Disney about AT&T at all, said one industry executive.

AOL's discussions with AT&T have come up during long-running "weekly negotiations" to deal with AT&T's 26% stake in Time Warner Entertainment. "Mike's just trying to scare Comcast into raising its bid," said the CEO of one media company.

Comcast's reaction? Even though the 20% drop in Comcast stock has cut the value of its initial $58 billion offer to $50 billion, the company's posture is that it won't up the ante, certainly not without a competing bid. "It's a spectator sport for us," said one Comcast executive. "We have the only bid on the table."

<p>Player</p><p>Odds</p><p>Why</p>

Vivendi

80-1

A seller's favorite kind of player: "an undisciplined buyer," says one media CEO. But U.S. cable systems aren't an obvious fit.

Cox

75-1

Robbins definitely loves size but has never shown interest in big takeover fights; Cox sisters unlikely to cede control, take big financial risk

Charter

65-1

Kent would love to get bigger, but leverage is high. Allen has already lost billions of dollars on dotcom investments.

Disney

40-1

Eisner, always battling with MSOs, could control distribution. But cable systems would tank earnings. And he'd have to pay nasty ESPN rate hikes.

AOL Time Warner

10-1

Clearly has the best mix of capitalization, assets andmanagement to take on Comcast. But Case and Levin would face regulatory nightmare.

Comcast

2-1

Motivated buyer. Has plenty of financial capacity, desire for size, potential management efficiencies. Can pay off rival suitors later.

AT&T

2-1

Armstrong doesn't have to sell. Auction is a rather loud no-confidence vote in AT&T management. May really believe financial promises.

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