AT&T Merging with Comcast Tonya Mealey, Teneisha Bonner, and Richard Chan
ECON220-X-1302B-02/Professor Luzius
July 14th, 2013

Abstract For our group 5 project, we have collected information about the company AT&T merging with Comcast. In this paper, the industry description introduces the company and explains the history of the company. The supportive argument and the argument against the merger are discussed.
Keywords: AT&T, Comcast

AT&T Merging with Comcast

Initially, Comcast proposed to buy AT&T Broadband for 44.5 billion in assets and 13.5 billion in deficit assumption. AT&T’s committee did not accept the acquisition and Comcast offered to merge with AT&T broadband to establish AT&T Comcast. AT&T assets have been dropping and this coalition would probably help them by letting Comcast, which has a great understanding in the broadband business, work with the many resources AT&T has to present. The merger is set at $72 billion. Comcast thinks the coalition with AT&T will keep them rich and it will get 2.2 million broadband consumers and 22 million co responders, news and entertainment supporters. They are evaluating the merger to decide if the aftermath will be an accomplishment or a downfall (Brinkerhoff, 2010).

Industry Description: AT&T, is considered to be a telecommunications industry, and is among the world’s premier voice, video, and data communications companies serving millions of consumers, businesses, and the government. By the research and development capabilities of AT&T, Labs this company runs the world’s largest and most sophisticated communications network, and is the largest cable operators in the United States. This company is the leading supplier of data, internet, and managed services for businesses (Comcast, 2013).
Comcast Corporation is engaged in the development, management, and the operation of broadband cable networks. Also, it is in the prevision of content through principal ownership of QVC, this Comcast-Spectator and Comcast Sports Net, controlling interest in Entertainment Television and programming investments, (Comcast 2013).
The Merger Research: The two companies that want to merge as one company is, AT&T telecommunications industry, and Comcast Corporation. The new company is to be called the AT&T Comcast Corporation. This new company wants to be the leading communications, media, and Entertainment Company in the world. The combined companies will expand to 41 States with approximately five million digital video customers, and 2.2 million high speed data customers, and one million cable telephony customers. This new company will be the leading provider of broadband video’s, voice, and data services with annual performance revenue of approximately nineteen billion in revenues. This new corporation will begin with a clear mandate to expand their services throughout thirty-eight million homes (Comcast 2013). Under the terms of the merger agreement AT&T shareholders will receive 0.34 shares of AT&T’s Comcast Corporation for each share of AT&T shares at closing of the merger. And the Comcast shareholders will receive one share of AT&T’s Comcast Corporation for each Comcast share they own. Then the AT&T shareowners will then own a 56% economic stake and a 66% voting right in the new company. The terms of the merger also state that the Robert’s family which owns Comcast Class B shares would control one third of the new companies voting interest, (Comcast 2013). When they merged:
When AT&T and Comcast merged, the assets from both of these companies’ cable television systems, AT&T’s interest in cable television joint ventures, plus its 25.5% interest in the Time Warner Entertainment, and Comcast’s interest in the QVC, E. Entertainment, plus the Golf Channel, including any other entertainment properties. This included the subsidiary trust securities held by the Microsoft Corporation, aggregates the value of this transaction to AT&T shareholders worth 72 Billion Dollars, based on Comcast’s closing price of this merger agreement and the price of Comcast’s Class K stocks as of Dec, 19, 2001. The shareowner’s would also receive the value equivalent to 13.07 per AT&T’s shares based on Comcast’s closing share price on Dec 19th, even though they retain complete ownership of AT&T’s traditional communications business. In the conjunction of the mergers transaction, the Microsoft Corporation has agreed to convert the Five Billion Dollars of AT&T’s subsidiaries trust, and preferred securities in One hundred and fifteen million shares of AT&T’s Comcast Corporation.
The supportive argument: The argument for the merger is that AT&T Broadband with Comcast will be a more efficient and productive company. This company will experience more efficient economies of scale, and as a result of combining administrations, it will increase the use of its own capacity. Because AT&T and Comcast will each contribute to this merger, they will also contribute five board members to the new company, and then they will jointly select two additional members who have no current affiliation with either company. Then as part of the agreement of the merger, Brian Roberts will be chief executive officer of the new company, and Armstrong will serve as chairman of the new company and will remain chairman and CEO of AT&T. Along with Armstrong and Roberts they have established a transition team to address issues that may arise from the merger. This merger is also subject to regulatory reviews approval by both companies’ shareholders. They also intend to proceed with other aspects of its previous announced restructuring, including tracking stocks for its consumer services unit, which will be fully distributed to AT&T shareholders following the shareholder approval in 2002. So to this merger would benefit society and can result in increases in both Dynamic Efficiency, and Productive Efficiency. The argument against the merger: An argument against the merger/acquisition of AT&T Broadband by Comcast Corporation would be that combining the two largest companies in the industry would lay claim to a controlling share of the market that would hinder open competition. The merger is a horizontal integration that FCC rules clearly states that interest of a single company cannot exceed more than 30 percent of the industry’s multichannel video programming distributors (MVPD) subscribers. AT&T’s interest in Time Warner Entertainment’s (TWE) 27.64 percent of the market combined with Comcast’s market shares would elevate the newly formed company’s interests to 38 million subscribers or 41 percent. After review of the merger the FCC approved the merger with the condition that AT&T’s place all of its interests in Time Warner Entertainment (TWE) in a trust the day the merger is completed. And within the next five and a half years the company would completely divest itself of all interest in TWE.

Summary: Other firms in the industry made offering to AT&T as well. AOL intent to acquire AT&T Broadband was based on combining AOL’s 12.7 million subscribers with AT&T’s 14.4 million to give AOL a huge share of the market. Anticipating an investigation into the acquisition based on the projected market share of the new company AT&T decided to break off negotiations with AOL. Cox on the other hand withdrew from negotiations when a different problem surfaced. Federal Trade regulations disallowed the ownership of a television station and a cable system within the same demographic area. Other firms in the mix were Time Warner, and Cablevision Systems. Our analysis of the organization between Comcast and AT&T resolves that the organization will be useful for both the industries. AT&T will be able to return back to its center ability of communications and not expand its assets to thin. Comcast will get permission to get into AT&T’s enormous communications possessions. AT&T Comcast will be the number one large telecommunication company in the whole wide world (Brinkerhoff, 2010).

References:
AT&T Broadband to Merge with Comcast Corporation in $72 Billion, (2001). Retrieved from http://corporate.comcast.com/news-information/news-feed/att-broadband-to-merge-with-comcast-corporation-in-72-billion-transaction
The Industry Handbook, the Telecommunications Industry, (2013). Retrieved from http://www.investopedia.com/features/industryhandbook/telecom.asp
Evansburg, A., Watson, V., Welch, B. (Mar 2003). FCC approves AT&T Comcast merger. Intellectual Property & Technology Law Journal, 15(3), 20
Lieberman, D. (2001, December 20). Tech investor. USA TODAY. Retrieved from http://usatoday30.usatoday.com/life/cyber/invest/2001/12/20/att-comcast.htm
Brinkerhoff, D. (2010). A strategic analysis. Retrieved from http://www.davidbrinkerhoff,com/att/final-sap-pdf