Comcast Corp. has sweetened its offer to acquire AT&T Corp.'s cable operation, sources familiar with the situation said, joining what is expected to be a heated bidding war for the broadband unit.

Both AOL Time Warner and Cox Communications worked through the weekend to finalize their own formal takeover offers for the No. 1 U.S. cable operation, sources said, although the status of those bids could not be confirmed.

Cox had submitted an offer to AT&T representatives late last week, but was expected to continue making adjustments to that bid right up until the bidding deadline, the sources said.

Software giant Microsoft Corp. offered to back Cox and Comcast's proposals in order to stifle rival AOL's bid, the Wall Street Journal said on Tuesday, quoting people familiar with the situation. With $36 billion in cash, Microsoft is trying to keep AT&T's subscribers with an ally, it said in its online edition.

In addition to backing Cox and Comcast financially, Microsoft also was considering investing $4 billion in the division, according the newspaper.

The New York Times quoted executives close to the bidding as saying that Microsoft has made a deal with AT&T to support it if AT&T Broadband is spun off independently.

AT&T's board is expected to meet on December 8 to begin reviewing the bids and weigh each against pursuing its original plan of spinning the unit off into an independent entity. A final decision is not expected for several weeks.

The bidding deadline came on the same day that AT&T was forced to move to its own network nearly 40 percent of the 850,000 customers who lost service this weekend when ExciteAtHome Corp. shut off service.

AT&T, Comcast, Cox, and AOL Time Warner all declined to comment Monday. A Microsoft spokeswoman said the company would not comment on rumors about future investment opportunities.

Comcast offered to cut its voting stake to about 35 percent from its original bid of 45 percent to 49 percent, said people close to the situation according to the Wall Street Journal. Comcast had also offered to take a stake in AT&T's TWE, which boosted the bid price, the newspaper said.

Exact details of Comcast's improved offer could not immediately be learned, but industry analysts presumed all along the company would sweeten its bid since AT&T rejected its previous all-stock offer, initially valued at $44.5 billion.

Sources said AT&T was pressing the bidding parties to offer at least $50 billion for the operation, which boasts about 14 million subscribers nationwide. But, even if it obtained such a price, it would still represent about half what AT&T spent to put the operation together in the first place.

Comcast was also expected to address certain governance issues that AT&T objected to when it made its initial takeover offer in June.

Specifically, AT&T was disenchanted with a proposed structure that would leave AT&T shareholders with a majority equity stake, but less voting control.

Indeed, the Wall Street Journal reported that Comcast offered to have the board of directors almost equally split between AT&T and Comcast, and to give a large role to C. Michael Armstrong, AT&T's chairman and chief executive.

AOL Time Warner had previously offered to merge AT&T Broadband with its Time Warner Entertainment partnership it already shares with AT&T, sources said. Such an arrangement would give AOL a 40 percent stake in the broadband unit, allowing AT&T to maintain the majority ownership it needs to ensure a tax-free transaction for its shareholders.

Originally thought to be a long-shot because of the regulatory hurdles such a combination would face, AOL Time Warner has recently accelerated its pursuit of the broadband operation, sources said.

The attraction is obvious. AOL Time Warner, the No. 2 U.S. cable television company, covets the size acquiring AT&T Broadband would provide, giving it an unparalleled, high-speed network across which to distribute its programming, movies, and music.

Comcast is eyeing AT&T Broadband for many of the same reasons. Combined, the companies would reach some 22 million subscribers nationwide.

A combination with Cox may be the most palatable for AT&T.

Several members of AT&T's board and executive team would like to see the operation remain independent, sources said. But if it must be sold, a combination with Cox could give AT&T shareholders the most voting power and might even include spots for certain members of AT&T's management.