Comcast's bid close to AT&T value

Although AT&T has bragged about spending $120 billion in cable, Comcast's $58 billion bid isn't quite the train wreck the math makes it seem. Chairman Mike Armstrong did indeed brag to Wall Street and regulators about spending $120 billion - $62 billion for MediaOne Group and $48 billion for Tele-Communications, Inc., plus billions more for system upgrades.

A careful look, however, even if AT&T's cable systems are worth Comcast's bid, the math isn't as terrible for Armstrong as it looks. Armstrong can argue with a stratight face that his stake in the cable business cost him around $67.5 billion. SEC filings show the deals were really worth $97 billion when they closed. Capital spending so far has hit Armstrong's initial expectations, running about $10.1 billion through June. Put AT&T Broadband's outlay at $107 billion.

But those acquisitions, particularly MediaOne, came with all sorts of odds and ends in the attic that AT&T has sold or that aren't covered by the Comcast bid. Sold are a $3 billion stake in UK cable operator Telewest, $2.7 billion worth of UK cellular operator Vodafone and stray bits like Hungary's Westel Radiotelefon and Popland's Polska Telefonia Cyfrowa. Total after-tax proceeds from the asset sales: $26 billion. Throw in the value of stakes in Time Warner Entertainment, Cablevision Systems and Rainbow, then penalize for a multi-billion dollar Excite@Home misstep, and AT&T may be just 16% more than Comcast's $58 billion offer. Can Mike Armstrong squeeze another $9.5 billion out of Comcast - or someone else - and save face?
- John M. Higgins