AT&T agrees to create massive cable TV company through $52 billion deal with Comcast
Thursday, December 20th 2001, 12:00 am
By: News On 6
NEW YORK (AP) _ AT&T and Comcast Corp. have reached a $52 billion deal to merge their cable television operations, creating a cable behemoth that will have more than 22 million customers.
The agreement, announced Wednesday night, would easily create the nation's biggest cable company _ dwarfing AOL's Time Warner Cable and its 12.7 million subscribers. The new company would have a presence in 41 states and customers in 17 of the nation's 20 largest metropolitan areas.
The deal ended a bidding contest for AT&T Broadband that started five months ago. That's when Comcast, the nation's No. 3 cable operator, mounted a $41 billion hostile bid for the AT&T unit, the nation's biggest.
Although AT&T spurned that offer, the company's board ultimately agreed to merge the cable unit with Comcast after rejecting bids from No. 2 AOL Time Warner and No. 5 Cox Communications.
``This is a leap forward in realizing a vision that thousands of AT&T people have worked toward _ bringing greater choice in affordable broadband video, voice and data services to even more American homes,'' said Michael Armstrong, AT&T's chairman and chief executive.
Under the plan, New York-based AT&T will spin off its cable division and merge it with Philadelphia-based Comcast. The deal includes AT&T's 25 percent stake in Time Warner Entertainment and the assumption of $20 billion in AT&T debt.
Microsoft Corp.'s $5 billion stake in AT&T Broadband will be converted into shares of the merged company.
Armstrong will serve as chairman of the new company _ to be named AT&T Comcast Corp. _ instead of retiring from AT&T in 2003 as planned. Brian Roberts, Comcast's president, will be chief executive of AT&T Comcast.
``I look forward to working with Mike and the AT&T Broadband team to achieve the full potential of this tremendous new company,'' Roberts said.
Under the terms of the deal, AT&T shareholders will receive about 0.34 shares of AT&T Comcast Corp. for each AT&T share they own, while Comcast shareholders will get one share of AT&T Comcast Corp. for each Comcast share.
The deal is expected to be completed at the end of 2002. The new company will have headquarters in Philadelphia while maintaining executive offices in New York.
AT&T's chief financial officer, Chuck Noski, said a transition team would determine the fate of AT&T Broadband's headquarters in Denver and decide how many employees the new company will have. AT&T Broadband has about 40,000 workers and Comcast has about 35,000.
AT&T Broadband has roughly 13.8 million cable subscribers, according to the National Cable Television Association.
In a statement, Cox said it was disappointed with the outcome, but declined to disclose details of its bid. AOL Time Warner spokesman Ed Adler declined to comment.
The bidding process started after Comcast made its surprise offer the day before AT&T's spinoff of its wireless operation into an independent company. That spinoff was the first stage in a plan to break the communications conglomerate into five separate companies.
Analysts had said a decision to sell the broadband unit to AOL Time Warner would have faced heavy scrutiny by regulators wary about a combined company with about 26.4 million subscribers.
Regulatory scrutiny is still expected, but observers have said the AT&T-Comcast combination would probably be approved.