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Comcast, AT&T to form nation's largest cable firm $52 billion agreement comes five months after initial Comcast bid was rejected as being too low.
By Alan Clendenning
Associated Press
December 20, 2001
NEW YORK -- Comcast Corp. will merge with AT&T's broadband unit in a deal worth about $52 billion, ending a bidding contest for the largest U.S. cable television operator, the companies said Wednesday night.
AT&T's selection of the Comcast bid came five months after it spurned a $41 billion unsolicited bid by the nation's No. 3 cable operator for the cable division as being too low.
The deal also includes about $20 billion in AT&T debt.
Under the merger plan, AT&T will spin off its cable division and simultaneously merge it with Comcast, forming a company called AT&T Comcast Corp.
The company's board met earlier this month to discuss bids for its broadband operations -- including the possibility of spinning it off as a stand-alone business -- but decided to have further discussions with bidders before making a decision.
Other companies that submitted bids for Denver-based AT&T Broadband were AOL Time Warner Inc. and Cox Communications Inc.
Microsoft Corp. also considered increasing its stake in AT&T Broadband, or participating in a bid by Comcast or Cox in return for a stake.
AT&T Broadband has about 13.8 million cable subscribers, including more than 3 million who use its digital video services, according to the National Cable Television Association.
Comcast has a major cable presence in central Indiana.
The bidding process started after Comcast, the nation's No. 3 cable operator, made a hostile bid in July for AT&T Broadband.
Comcast's surprise offer came the day before the New York-based AT&T's spinoff of its wireless operation into an independent company, the first stage in a plan to break the communications conglomerate into five separate companies.
The biggest of those AT&T units is the sprawling cable operation that AT&T cobbled together with a $100 billion acquisition spree that began three years ago.
Analysts had said a decision to sell the broadband unit to AOL Time Warner, the nation's second-largest cable company, likely would face heavy scrutiny by federal regulators and politicians wary about a combined company with 26.4 million subscribers.
The combination with Comcast would create a cable operator with 22.3 million subscribers, dwarfing AOL's Time Warner Cable, which has 12.7 million subscribers.
While regulatory scrutiny is inevitable, observers have said the combination probably would be approved in Washington.
The Supreme Court on Dec. 3 had refused to consider reinstating government restrictions on the number of subscribers that cable companies can have.
The decision rejected arguments by consumer groups who fear the possibility of a cable monopoly.
The Bush administration asked justices to turn down the case because federal regulators are working on new rules to address monopoly concerns.
AT&T shares rose 15 cents to $16.80 in trading Wednesday on the New York Stock Exchange. In after-hours trading, they were up 15 cents.
Shares of Comcast were down $1.02 to close at $38.07.
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