As [email protected] tumbled into bankruptcy Friday, controlling owner AT&T offered to buy its broadband access assets for $307 million in cash.
The Chapter 11 filing in San Francisco had been expected for weeks, with the nations biggest broadband service facing a severe cash crunch despite signing up 3.67 million customers by the end of the second quarter. The filing will allow continuation of its cable modem Internet access and other services pending the approval of the sale, [email protected] said.
"This filing is a tool to protect the value of the broadband business for the benefit of the companys financial stakeholders and will help reassure our customers that service will continue uninterrupted through the restructuring process," said Patti Hart, [email protected] chairman and chief executive officer, in a prepared statement.
While AT&T may be the rescuer of its troubled service, "the asset purchase agreement remains subject to higher and better offers, AT&T said in a statement. The offer is also subject to bankruptcy court approval and other conditions.
"Assuming all of this goes through, and AT&T is the bid approved by the court, AT&T would decide what to do with the assets, including the employee assets," said Londonne Corder, [email protected] spokeswoman. "We have enough cash on hand to get us through the restructuring process. While the bid is important, and reinforces the value proposition of the company, it was unnecessary to the restructuring."
AT&T is offering to buy proxy and caching servers as well as Cisco routers in 100 cable headends, and telecom links that connect the headends to [email protected] regional data centers. AT&T also wants to buy the routers and servers in the data centers, which connect to the public Internet on AT&T leased fiber, said ATT Broadband spokeswoman Sarah Eder.
"Taking over the assets ensures we are going to continue to be able to serve our customers," Eder added.
Part of [email protected] trouble came from a balkanized ownership structure with cable powerhouses Cox Communications, Comcast and AT&T fighting over the service, which has been their exclusive cable modem Internet access provider. AT&T won the power struggle in a costly buyout of its partners, now holding voting control and a 23 percent economic interest.
Ironically, Comcast Friday agreed to a confidentiality agreement with AT&T that is expected to pave the way to serious talks about a merger of their cable empires. Comcast said the agreement restricts discussion between its company and others relating to AT&T Broadband without AT&Ts approval. AT&T earlier rejected an unsolicited bid from Comcast as too low and is entertaining other suitors for the nations largest cable company.
While AT&T Broadband accounts for the bulk of [email protected] customers, with 1.34 million, the company also plans to take over management of the network for customers using the service through Cox Communications, Comcast and Charter Communications, said Eder.
"Anything [email protected] was managing previously, this offer extends to that, Eder said. " There are AT&[email protected] customers and other customers that are served by the @Home network, so well be working with other cable companies as well."
The cable modem service @Home, developed as a brainchild of cable magnate John Malone and others, got into trouble after spending $6.5 billion on content plays during the height of the dot-com boom.
In addition to buying the Excite portal, the company spent $780 million for online greeting card company Blue Mountain.com, $425 million for iMall.com, and $89 million for database marketing player MatchLogic. [email protected] recently sold BlueMountain.com for $35 million in cash to American Greetings and announced Sept. 25 it is closing down MatchLogic.
[email protected] has been unsuccessfully trying to rid itself of the Excite part of its business since last year, according to Mike Paxton, a Cahners In-Stat Group analyst.