MCI Worldcom Has Yet to Approach Comcast

MCI Worldcom, which was reported to be considering teaming with Comcast Corp. in its fight against AT&T Corp. for Mediaone Group, has yet to begin formal talks with the cable company.

Reports published earlier Tuesday said MCI was considering joining Comcast to make a new bid.

Mediaone formally accepted AT&T’s $58 billion offer over the weekend, which nixed an earlier $53 billion deal to be acquired by cable company Comcast. Given Comcast’s Thursday deadline to raise its trumped bid for MediaOne,
sources told Reuters it now appears unlikely MCI would join Comcast to offer more
than AT&T Corp.’s friendly, agreed-to $56.4 billion bid.

The Wall Street Journal reported Tuesday that MCI Worldcom was close to signing a confidentiality agreement with Mediaone that would give it access to financial information.

The newspaper, citing executives familiar with the deal, said America Online Inc. had decided not to help Comcast in its bid. However, they said AOL might come back in if a third company was recruited which would lessen its financial commitment. Those sources say MCI Worldcom may end up being the third company.

Microsoft co-founder Paul Allen, who controls a number of cable assets, has also reportedly decided to stay out of the fight.

Joining Mediaone would signal a strategy change for MCI Worldcom which has traditionally focused on business users and not consumers. Teaming with Comcast to acquire Mediaone would give MCI Worldcom a big stake in the consumer cable industry.

A deal would also give MCI Worldcom access to Mediaone’s 5.5 million customers which would help MCI define its high-speed Internet strategy. Traditionally, MCI has focused on business customers through its UUNET subsidiary.

If MCI Worldcom and AOL teamed up to buy Mediaone, it wouldn’t be the first time the two had partnered. MCI Worldcom and AOL have had a relationship since MCI acquired the network assets of AOL and CompuServe when AOL acquired CompuServe in 1997. AOL is now one of MCI Worldcom’s largest data customers.

AOL also sees a deal for Mediaone as a way for it to get access to cable homes. AOL fears its business would be severely impacted if it is not allowed to offer its content and services over a high-speed service. AOL has already struck a number of deals with regional telephone companies to jointly offer Digital Subscriber Line service.

What’s still unclear is what role Microsoft Corp. will play. The software giant has already invested $1 billion in Comcast and has the financial muscle to help finance a deal for Mediaone. Microsoft could also buy Mediaone itself.

Spokesmen for AOL and Allen would not comment on the reports.

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