Comcast, AT&T Broadband in $52 Billion Deal

N E W   Y O R K, Dec. 20, 2001 -- In the biggest corporate merger of 2001, Comcast is taking over AT&T's broadband unit for $52 billion to create a new cable powerhouse.

If approved by government regulators, the deal would create the biggest cable company in the United States, with 22.3 million subscribers. AT&T Broadband is the nation's largest cable company, with 13.8 million customers, and Comcast ranks third, with 8.5 million.

AT&T will spin off its cable unit into a separate company and merge the newly-formed entity with Comcast at the same time.

"If you think broadband has a great future, this accelerates that," said Comcast President Brian Roberts at a press conference today announcing the merger.

"This is all about putting two companies to grow, even faster than on our own," said AT&T's CEO, Michael Armstrong.

Investors had a mixed reaction to the deal, with AT&T's stock price rising in morning trading $1.41 to $18.21, while Comcast fell $2.24 to $35.83.

Five-Month Bidding War

The merger, first announced Wednesday night, concludes an unusual five-month bidding war for AT&T Broadband that began five months ago, when Comcast offered $41 billion — only to see it shot down.

Subsequent offers from AOL Time Warner — the nation's second-biggest cable company, with 12.7 million subscribers — and Cox Communications were also rejected.

As proposed, the deal would involve a confluence of corporate interests. AT&T owns 25 percent of Time Warner Entertainment — part of the AOL Time Warner empire — while Microsoft owns a $5 billion stake in AT&T Broadband, which will be converted into an equivalent chunk of the new company.

AT&T shareholders will control 56 percent of the new company, but Roberts will be the CEO of the new company, and the Roberts family will control about one-third of the voting shares.

Antitrust Questions

Like any major corporate merger creating a new industry leader, the Comcast-AT&T deal is sure to bring about close antitrust scrutiny from the government.

Consumer advocates may argue that a new cable giant will reduce competition and provide fewer choices for viewers across the country. The new company would have subscribers in 17 of the country's 20 largest urban markets.

But it also comes at a time that largely favorable to such deals. For one thing, the Bush administration has signaled a willingness to accept large mergers.

Additionally, earlier this month, the U.S. Supreme Court declined to look at a ruling waiving government limits on the number of subscribers a cable unit can have.

At today's press conference, Roberts claimed the new company could be a boon to consumers because of the variety of services it could make available to users with a cable connection.

"This company has the potential to be the catalyst for so many great products for consumers," Roberts said.

Among the products Roberts cited were "Video on demand, interactive services, high-speed data services, cable modems … the most attractive way to get the internet in your home is with a cable modem."