Comcast was savouring victory yesterday in the long-running struggle for control of AT&T's cable interests with the announcement of a merger worth $72bn (£50bn) to create America's largest cable company with more than 22 million customers across the country.
The losers in the months-long fight were AOL Time Warner and Cox Communications; each had submitted their own bids for AT&T Broadband.
The deal, the largest corporate transaction of 2001, also opens new horizons for Bill Gates and Microsoft. His company quietly backed Comcast, in which it holds a 10 per cent stake, in its quest to win AT&T Broadband. Microsoft agreed, as part of the deal, to convert $5bn in debt it lent to AT&T into equity in the new company, to be called AT&T Comcast.
With a headquarters in Philadelphia, AT&T Comcast will have cable subscribers in 17 of the country's 20 largest metropolitan areas and a presence in 41 states.
It will be much bigger than its nearest rival, AOL Time Warner, which has about 12.7 million cable subscribers.
The new company – and behind it, Mr Gates – will have a direct line into one-fifth of US homes, capable of delivering far more than just television programming. The company will look to offer high-speed internet access, telephone connections in some areas and, over time, next-generation services like interactive television.
Michael Armstrong, currently the chairman of AT&T, will move sideways to become the first chairman of AT&T Comcast, instead of retiring in 2003 as he had been planning. Its president will be Brian Roberts, currently the chief executive of Comcast. The Roberts family holds about one-third of Comcast's voting stock.
In a sweetened offer, Comcast offered $47bn in stock to AT&T. It also agreed to assume $25bn in debt and other AT&T liabilities. Comcast also agreed to acquire AT&T's 25 per cent stake in Time Warner Entertainment. AT&T shareholders can expect to receive 0.34 shares of the new company for each AT&T share they own.
The markets yesterday applauded AT&T's choice. The company's shares soared $1.57 a share, or 9.3 per cent, to $18.37 in trading in New York. Comcast shares, however, fell $2.29, or 6 per cent, to $35.80 a share on the Nasdaq.
The battle began almost five months ago, when Mr Roberts launched a hostile bid for AT&T Broadband. He was immediately spurned but it forced the AT&T board to put its cable division in play.
The deal includes an unusually radical break-up clause. If either side decides between now and closing to walk away from the marriage, they will be forced to pay the other side $1.5bn. AT&T's chief financial officer, Chuck Noski, said yesterday he did not see that happening.Reuse content