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AT&T rejects Comcast takeover bid

AT&T's board of directors rejects Comcast's $44.5 billion offer to buy the phone giant's cable TV division.

AT&T's board of directors voted Wednesday to reject a takeover bid from Comcast, which had offered $44.5 billion to buy the phone giant's cable TV division.

The controversial offer, which would have thrown a wrench into AT&T's ongoing four-way breakup plan, was rejected on several grounds, the company said. But even if that initial offer is rejected, the company is signaling that it may be open to new approaches.

Even as it rejected Comcast's initial offer, AT&T said it would delay sending the final plans for breakup to its shareholders, as it looks at all the available options.

The board of directors "has directed management to explore financial and strategic alternatives relating to AT&T Broadband, including the previously announced restructuring plans," the company said in a press release. "The board's goal in exploring these alternatives is to provide the greatest long-term value to shareholders."

What the other "financial and strategic alternatives" might be remained immediately unclear. Rumors have swirled in recent weeks that John Malone, AT&T's largest shareholder and former board member, might lead his own bid for the company's cable networks. Other potential suitors include AOL Time Warner, one or a coalition of other cable companies, a local phone company, or even a coalition of broadcast TV companies.

"They clearly are talking to a bunch of folks," said Blair Levin, an analyst with Legg Mason. Many of these potential suitors would run into regulatory problems, he noted, while others would be hard-pressed to raise enough capital to mount an offer more attractive than Comcast's.

The company sent news of its initial rejection to Comcast in a brief letter, which was also distributed to the press.

"After careful review, and based in part on the advice and analysis of our financial advisors, Credit Suisse First Boston and Goldman, Sachs & Co., the (board of directors) determined that your proposal does not reflect the full value of AT&T Broadband," the company wrote in a letter addressed to Comcast's senior executives. "Further, the board is concerned that Comcast's multitier voting structure would put AT&T shareowners at a disadvantage in matters of corporate governance."

Comcast responded that it was "pleased" that AT&T had delayed action on the cable division spin-off, but said it stood by its original offer price. AT&T had not yet sought any further information related to Comcast's bid, and the company said its executives still "remain prepared to hold immediate discussions with AT&T regarding (the) proposal."

"We are pleased that AT&T's Board of Directors has responded to the market's overwhelming endorsement of our proposal by delaying its broadband tracking stock plan," said Brian Roberts, Comcast's president. "However, we disagree with the AT&T board's characterization of our offer as inadequate."

Since Comcast's original offer, AT&T's market value has gone up by $14 billion, the company noted.

AT&T Broadband was pieced together as the company bought Tele-Communications and MediaOne, which together cost more than $100 billion.