AT&T Corp. last week signed a definitive merger agreement with cable company MediaOne Group after cutting a deal with rival bidder Comcast Corp., which agreed not to try to outbid AT&T’s offer.
Comcast and AT&T agreed to exchange various cable systems, giving Comcast about 750,000 net additional cable subscribers. Because the transaction is lopsided, Comcast will pay AT&T a consideration of between $3 billion and $3.5 billion.
In addition, Comcast received a $1.5 billion break-up fee as a result of the termination of its merger agreement with MediaOne.
The $54 billion merger agreement between AT&T and MediaOne would make AT&T both the nation’s largest long-distance carrier and its largest cable provider. The company acquired 11 million cable customers with the close of its acquisition of Tele-Communications Inc. earlier this year and will control most of MediaOne’s 5 million cable customers when that transaction closes early next year.
Time Warner Inc., which will become the nation’s second-largest cable operator with 12.6 million customers, earlier this year signed a joint venture agreement with AT&T under which it will offer AT&T-branded cable telephony service to residential and business customers. Comcast agreed to a similar arrangement.
AT&T also last week said it would acquire the remaining 50-percent interest in Lenfest Communications Inc., a company which controls about 1.5 million cable customers in the Philadelphia area.
AT&T spokesman John Heath said the company doesn’t have any immediate plans for MediaOne’s international wireless properties in Europe and Asia, but he said AT&T’s focus is on its domestic wireless and cable assets.
The company hopes to offer a bundle of services to customers, including voice, video and Internet services.
In response to the AT&T/MediaOne deal, Roy M. Neel, president and chief executive officer of the United States Telephone Association, called on the Federal Communications Commission to create a docket on convergence in the communications industry to ensure regulatory equity in the global telecommunications marketplace.
Specifically, USTA asked the FCC to grant incumbent local phone companies relief from dominant carrier regulation and structural separation and accounting requirements. Neel also asked the FCC to lift interLATA restrictions on Bell companies.
Neel and USTA said the “AT&T monster” continues to grow unfettered and called AT&T “the nation’s largest vertically integrated, facilities independent, full-service provider of telecommunications services, Internet access and video services in America, and perhaps the world.
“The public interest demands that the FCC and other regulators conform their regulations to the new realities of the communications market,” continued Neel. “An FCC convergence proceeding begins that process.”
