Comcast claims victory despite AT&T’s rejection of bid
Comcast Corp. is declaring victory despite the rejection of its $54 billion bid for AT&T Broadband by the AT&T Corp. board late Wednesday. Comcast officials said their objective, after six months of fruitless talks with AT&T, was to convince the latter to sell its cable systems. “By indefinitely postponing the AT&T Broadband tracking stock, AT&T has decided to sell the systems,” said a high level Comcast executive who asked not to be identified. “They (AT&T) will maximize shareholder value by having an auction.”
“We are pleased that AT&T’s broad of directors has responded to the market’s overwhelming endorsement of our proposal by delaying its broadband tracking stock plan,” said Comcast president Brian Roberts in a prepared statement. “It is a positive step.”
“However, we disagree with the board’s characterization of our offer as inadequate.”
In a press release late Wednesday, Comcast pointed out that its bid boosted AT&T stock to $21 a share, creating an additional $14 billion in market value. Mr. Roberts also questioned the validity of the AT&T board’s concern about the Roberts family’s voting control of a merged entity, “as evidenced by the reaction of their shareholders … the board’s concern about our corporate governance has no foundation,” Mr. Roberts said.
“We are surprised that AT&T’s board has yet to ask us for any further information…we remain prepared to hold immediate discussions with AT&T regarding our proposal,” Mr. Roberts said.
Sources close to the company said Comcast will conduct serious discussions with Microsoft Corp., AOL Time Warner, other major cable operators and some content providers to possibly bring them in line behind their bid for AT&T Broadband to keep them from emerging as competitive bidders. Sources say at this moment they do not consider John Malone (AT&T’s largest shareholder and chairman of the soon to be spun-off AT&T tracker Liberty Media Group) as maneuvering behind the scenes against Comcast.
The AT&T board’s unanimous rejection of Comcast’s offer puts the broadband unit in play, although Comcast officials appear convinced no other counterbidders will surface who can top Comcast’s offer, operational and financial track record, or financial wherewithal to do the deal.
However, sources close to Comcast say the company privately fears that AT&T will drag out the bidding for its broadband unit, much the way General Motors has for its Hughes Electronics unit. “Anyone who would have been a serious bidder for the broadband unit would have come forward as Comcast did the past six months,” said one source close to the situation.
Tom Wolzien, analyst at Sanford Bernstein, said the most important part of the AT&T board’s action was that it has indefinitely tabled spinning off its broadband unit as a tracking stock. “They (AT&T) has totally thrown it open to open bidding,” said Mr. Wolzien, who added that he believes Comcast is best suited to make a successful better offer and to best operate the combined Comcast-AT&T cable systems. Early speculation on Wall Street is that Comcast will improve what it is paying per subscriber by about $100 to about $4,400 per subscriber and will buy and resell AT&T’s stakes in Time Warner Entertainment and Cablevision Systems.
That done, AOL Time Warner could likely throw its support toward Comcast in exchange for reclaiming AT&T’s 25 percent stake in TWE, a long-term AOL high-speed Internet access deal as well as a long-term Warner Bros. and Turner content deal with all of the combined Comcast-AT&T systems, analysts such as Mr. Wolzien said. Many analysts do not believe that voting control is a real issue. “I have yet to talk to any major cable institutional investor who cares about it,” Mr. Wolzien said. About 38 of Comcast’s top 50 institutional investors also own AT&T stock.
As another way to sweeten the deal, Comcast also could agree to a long-term telephony service agreement with AT&T for the companies’ merged 22 million cable subscribers, source said.
In a press release and in a letter to Comcast President Brian Roberts and his father, Comcast founding Chairman Ralph Roberts, AT&T Chairman and CEO Michael Armstrong said: “The board has directed management to explore financial and strategic alternatives relating to AT&T Broadband, including previously announced restructuring plans. The board is concerned that Comcast’s multitier voting structure would put AT&T shareowners at a disadvantage in matters of corporate governance.” Advising AT&T are Goldman Sachs & Co. and Credit Suisse First Boston.
Whatever the outcome, analysts say a few things are certain: AT&T Broadband will sell at a price much closer to the $120 billion that AT&T spent accumulating cable systems the past three years. Also, AT&T’s long-suffering TWE partnership problems seem destined for resolution, and most of the major cable players stand to get bigger as a result of AT&T’s fate. AT&T stock closed up slightly at $21 a share while Comcast stock closed down slightly to $37.49 a share.
ABC may put ‘Last Resort’ in daytime lineup: ABC is said to be close to bringing a major dose of reality to daytime. Sources say the network and its sister, the Disney-owned Buena Vista Television syndication unit, is about to announce the daytime stripping of “The Last Resort.” The show is being billed as an alternative-based series that offers “troubled” couples a chance to fly to an island resort to regain their romantic bliss-described internally as the antithesis of Fox’s controversial hit “Temptation Island” series.
A source close to ABC dispelled previous Hollywood talent agency rumors that longtime soap “Port Charles” was being considered for cancellation to make room for “Last Resort.” ABC sources say many details remain to be hashed out but stressed that ABC affiliates will continue to have the flexibility to schedule “Port Charles” anywhere on their daytime schedules.
“Last Resort” is said by sources to be in development with Fisher Entertainment, which is the TV production unit of group ABC affiliate owner, Fisher Broadcasting.
‘Big Brother 2’ and its advertisers under fire: The Parents Television Council, a nonprofit family TV watchdog group, is condemning a handful of advertisers that are members of the Family Friendly Programming Forum for sponsoring a “particularly vulgar and sexually explicit” episode of CBS’s “Big Brother 2” during the 8 p.m.-to-9 p.m. “family hour.”
Specifically, the PTC, headed by founder L. Brent Bozell III, cited the July 12 episode of “BB2,” in which New Jersey bartender Justin was expelled from the house after putting a kitchen knife to the throat of female housemate Krista. The PTC listed the six advertisers who placed commercial spots in the episode as Procter & Gamble, Sprint, General Motors, Kentucky Fried Chicken-Tricon Global, Combe and Unilever — all of which are Forum members. Also named by the PTC, as non-Forum sponsors of the “BB2” episode in question, were Universal Pictures, Burger King, Blockbuster Video, AOL Time Warner, JC Penney, Paramount/Village Roadshow Pictures, Columbia Pictures, CBS/Viacom, Target, MGM, Bayer, Church and Dwight, S.C. Johnson and Astrazeneca.
The PTC also highlighted the mission statement from the Family Friendly Programming Forum, an offshoot of the Association of National Advertisers, in its Web site (www.ana.net/family/default.htm) regarding its policy of promoting sponsorship that seeks to “ensure the existence of a family friendly television environment, particularly in the early evening time period. Specifically, we desire more movies, series, documentaries and informational programs, aired between 8 p.m. and 10 p.m., that are relevant and interesting to a broad audience and that the average parent would enjoy viewing together with a child.”
The PTC also excerpted quotes from the July 12 episode of “BB2,” where Mr. Sebik used threatening and offensive language toward his fellow housemates:
“You know what? I’m going back in there in 15 minutes. This time I’m going to punch her [Autumn] in the stomach. And you know, she made a date with t
he devil, you know what I mean?”
“If I do get that other one tomorrow, you know, the freakin’, the one that I’m going to give the black eye to? If I get her, Bro, you will guarantee you’ll hear her scream, ’cause I’m going to do her doggy-style and I’m going to give her such a kidney shot.” (makes motion as if to punch her in the kidney)
“I’m going to go out there and [bleeped “fucking”] punch you in the face if you go and say the second time.”
“That ain’t the [bleeped “fucking”] second time. That’s the first time I ever [bleeped “fucking”] touched that pillow, right?”
“Stand up and put your hands up like a [bleeped “fucking”] man cause I’m going to beat the [bleeped “shit”] out of you.”
Uncensored audio and video footage from “Big Brother 2” is also streamed live over the Internet on a subscription-only basis (through CBS.com and Real Networks Inc.).
“Is this what these members of the Family Friendly Programming Forum consider to be ‘family friendly?,'” Mr. Bozell asked rhetorically in a prepared statement. “While I’m amazed that CBS and the producers of ‘Big Brother 2’ would allow this kind of vulgarity and violence against women to air on broadcast television during the family hour, I am both dumfounded and appalled that corporate America is willing to pay for it. Hyping this trash is both inexcusable and irresponsible.”
A spokeswoman for the Association of National Advertisers said all of the Forum advertisers “issue broad guidelines” regarding what sort of 8 p.m. family shows to buy into.
She added that it was more of a question for agencies and advertisers to address in terms of specific placement in “Big Brother 2.”
“It is increasingly difficult to find suitable shows in the 8 p.m. family hour, because there are so few choices and there are always going to be instances where there could be questionable content in any show,” said the ANA spokesman. “That’s why the Forum advertisers are looking to fund the script development of family-friendly programming [such as The WB’s critically heralded “Gilmore Girls” and ABC’s upcoming sitcom “Raising Dad”]. I know that all the advertisers have strict review guidelines on scripted shows, but it becomes more problematic monitoring for offensive content in a live, unscripted show [such as “Big Brother”].
Spokespeople for “Big Brother 2” and Procter & Gamble, one of the founding members of the Forum, were unreachable for comment.
GM expects lower ad spending in 2001: General Motors Corp. said its ad spending this year will be lower than it was in 2000, when the auto giant spent $2.84 billion in measured media, according to Taylor Nelson Sofres’ CMR. During GM’s second-quarter announcement Tuesday, Paul Ballow, GM’s general director of market and industry analysis, declined to discuss the percentage of the ad budget that was shifting, though he did say it was “not a big shift.” GM’s first-quarter ad spending was lower by 22 percent, but Merrill Lynch & Co. said GM’s ad spending is likely to pick up in the second half of the year, when ad spending is typically higher.
Merrill Lynch also said GM’s discussion of 2001 ad spending may bode well for Interpublic, the company responsible for GM’s account in the U.S. and globally. WPP and Omnicom Group should benefit as well, because their respective clients — Ford Motor Co. and DaimlerChrysler — will likely respond competitively to GM’s moves.
AOL Time Warner to step up broadband plans, cut costs: Gerald Levin, AOL Time Warner chief executive, declined to comment on his company’s “views or activities” related to Comcast’s $54 billion bid for AT&T Broadband, which Mr. Levin said underscores broadband’s value as more advanced digital services roll out this year.
The company said it will offer multiple Internet service providers to digital cable subscribers in their top 20 markets — or half of all subscribers — by year-end featuring AOL, EarthLink, Juno and HAS. Mr. Levin said in the second half of 2001, the company will be squarely focused on broadband services and local advertising growth, the remaking of CNN, increased cross-platform advertising deals and increased content and entertainment returns.
It was clear during a conference call with analysts and investors Wednesday morning that AOL Time Warner is stepping up “permanent cost cutting” to offset slower revenue growth to achieve its full-year targets — $11 billion in earnings on $40 billion in revenues (which now represents the “top end” of what the company will deliver), officials said.
But the company raised its 2001 cash earnings per share estimates to 30 percent to 40 percent, or $1.28 per share to $1.32 per share, from a previous target of 25 percent to 30 percent.
Today, AOL Time Warner reported better-than-expected second-quarter cash earnings — excluding goodwill amortization and charges — up 28 percent to 32 cents per share compared with 23 cents per share a year earlier. Second-quarter free cash flow grew 55 percent to $519 million, on track to grow more than 200 percent this year.
However, the company posted a net loss of $734 million, or 17 cents per share, that includes goodwill amortization costs, down from a net loss of $924 million, or 22 cents per share, a year earlier. Revenues rose 3 percent to $9.2 billion from $8.9 billion, falling short of Wall Street consensus estimates of $9.74 billion for the quarter.
The world’s largest media company indicated the first signs of being adversely impacted by the current advertising slowdown, since its advertising and commerce revenues were essentially flat for the quarter at about $2.3 billion. Cable networks and print publications also suffered low ad-dependent revenues.
The company said it expects its content businesses, including the film studio and television, to pick up during the second half of the year. AOL and Time Warner Cable posted strong revenues increases of 26 percent and 19 percent, respectively, in the period.
Since AOL Time Warner announced second-quarter earnings results this morning, the stock has declined more than $4 to trade near the $45 mark, helping to sink other major media issues as well.
Sinclair expects strong second-quarter results: Sinclair Broadcasting said it expects second-quarter broadcast revenues of $175.6 million and broadcast cash flow to come in at 49 cents a share, compared with previous company guidance of 28 cents to 30 cents.
The second-quarter revenues would be down nearly 10 percent from a year ago, but better than the 13 percent to 15 percent drop the company previously expected. However the company, which reports second-quarter earnings July 26, did not revise its full-year broadcast cash flow estimates of $1.25 per share to $1.30 per share.
The company attributed the improvements to better than expected advertising revenues. Sinclair recently announced that Millennium Sales & Marketing, a division of Katz Media Group is representing Sinclair’s 62 television stations with national advertisers through 2006.
ABC Cable Networks reorganizes: ABC Cable Networks Group has reorganized, creating a new global entity and realigning its businesses along individual network lines. Accordingly, two senior executive title and mandate changes have been announced by Anne Sweeney, group president. Eleo Hensleigh has been named executive vice president, worldwide brand strategy, and Paul Robinson has been named senior vice president, worldwide programming strategy.
Ms. Hensleigh’s domain includes both domestic and international cable channels, wholly owned as well as developing, and the Disney One Saturday Morning block that airs on ABC. She will oversee the development of brand management and planning cross-media and worldwide.
Mr. Robinson will be responsible for developing and managing programming across channels and regions, as well as developing a programming inventory and managing programming assets to maximize brand value. He will continue to oversee Walt Disney Branded Television U.K. and Ireland.
Ms. Hensleigh was previously executive vice president of marketing for ABC Cable Networks Group. Mr. Robinson was previously senior vice president
and managing director of Walt Disney Branded Television U.K. and Ireland.
In addition, under the newly announced organization, each wholly owned network will have its own infrastructure and general manager.
Gordon leaves WTVD-TV: After four years as general manager, Bruce Gordon resigned Monday from ABC-owned WTVD-TV, Raleigh-Durham, N.C. “I just think it’s time to see what else is available,” he told the Raleigh News & Observer. Mr. Gordon was finance director for KABC-TV, Los Angeles, for 10 years prior to his stint at WTVD.
Studios USA signs development deal with ‘Just Shoot Me’ duo: Studios USA has signed the writing and producing team of Gabe Sachs and Jeff Judah to a multiyear development deal. As part of the deal, sealed by Sarah Timberman, president of Studios USA Programming, Mr. Sachs and Mr. Judah will be developing comedy, drama and reality series.
Mr. Sachs and Mr. Judah, who have been a writing team since 1998, most recently served as consulting producers on the upcoming fall 2001 Fox sitcom “Undeclared.” Last season, they served as co-executive producers on the NBC comedy series “Just Shoot Me.” They were also supervising producers of the critically received but short-lived NBC dramedy “Freaks and Geeks.”
Mr. Judah’s previous credits include serving as a staff writer on NBC’s “The Tonight Show with Jay Leno,” CBS’s “The Late Show With David Letterman” and NBC’s former talker, “Later With Greg Kinnear.”
Mr. Sachs and Mr. Judah are represented by Dan Brecher at The Rothman Agency, manager Scott Howard and attorney Mark Gochman at Stankevich & Gochman.
Obey drops plans to amend budget bill: Rep. David Obey of Wisconsin, ranking Democrat on the House Appropriations Committee, has dropped plans to amend a pending budget bill this week with provisions barring the Federal Communications Commission from using its funds to examine its broadcast ownership rules.
The amendment, had it become law, might have interfered with an upcoming agency review of its ownership rules that could result in relaxation of some of them. “The fear was that the industry is so strong that we would lose by a large enough margin that it would seem like it was a hopeless cause,” panel spokesman Dave Sirota said. But Rep. Obey isn’t giving up altogether. He plans to offer the amendment later this congressional session after attempting to build a coalition of members to support it. “The battle is not over,” Mr. Sirota said.
VH1 Classic Channel premieres on DISH Network: DISH Network, a U.S. direct broadcast satellite television entertainment company, announced that it will debut VH1 Classic on its network Wednesday and will offer the channel to customers at no charge as part of its America’s Top 150 programming package. The company has also released its DISH On Demand pay-per-view lineup for August. Offerings will include “Crouching Tiger, Hidden Dragon,” and “Cast Away.”#(c) Copyright 2001 by Crain Communications