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AOL out of MediaOne bid
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May 3, 1999: 8:42 p.m. ET
Sources say online giant not moving ahead with Comcast on MediaOne offer
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NEW YORK (CNNfn) - If Comcast Corp. is going to mount a counterbid for MediaOne, then it will have to do it without help from America Online Inc.
According to sources close to the matter, AOL, the world's largest online provider has decided not to team up with Comcast in its effort to thwart a rival bid by AT&T Corp.
AOL, which last week inked an agreement allowing it to inspect MediaOne financial information, is the latest trouble for Comcast's $48 billion bid for MediaOne.
On Monday, MediaOne rejected the Comcast offer in favor of a $58 billion offer by AT&T Corp.
Bidding war could be costly
Sources said AOL may have been concerned about getting into a bidding war with AT&T. While AOL's stock market value is worth about three-fourths of AT&T's, AOL has just $2.7 billion in cash.
AT&T, on the other hand, has a $30 billion war chest it assembled in the corporate debt market just last week -- and has the fiscal clout to pay more of its offer in cash.
And another possible reason for AOL pulling out of the deal is that the online giant is not as interested in owning cable as it is in making sure the lines are a viable conduit for the transmission of its service for users.
That would include traditional copper-wire, "narrowband" phone, cable-based high-speed, or "broadband" delivery and digital subscriber line, or DSL, technology.
Microsoft waiting in the wings?
Comcast has until Thursday to respond to AT&T's bid. But cash-rich Microsoft Corp., which has a 5-percent stake in Comcast, is in the thick of negotiations to become a financial partner for Philadelphia-based Comcast.
Among the possibilities being discussed are Microsoft taking over the Comcast bid on its own, beefing up the Comcast offer with a cash injection, or aligning with AT&T itself to carve up MediaOne.
Microsoft Co-founder Paul Allen, owner of investment firm Vulcan Partners and a primary investor in cable properties, is also said to be in continuing deliberations with MediaOne.
That third possibility could be likely because AT&T, already the nation's top long-distance provider, would also become the leading cable company if it gobbles up a full-size MediaOne. And that could prompt regulatory concerns.
Shares of America Online (AOL) fell 9-5/8 in Monday trading to 133-1/8; MediaOne (UMG) fell 1-15/16 to 79-11/16 and Comcast (CMCSA) added 3-1/16 to 65-15/16.
AOL, Comcast, Microsoft and MediaOne declined to comment.
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