After several months bidding, Comcast finally win and value at $72 billion on this merger. Comcast has confidence in merging, because they believe that this merger will not only reduce their cost but also increase the market share. Needless to say, this merging would be beneficial for both AT&T and Comcast. Firstly, Comcast will still focus on its cable and broadband business and engage in innovation the cable and broadband services. By merging AT&T, Comcast will absorb the telephone services from AT&T, who is the leader in this industry. This acquisition would allow the new corporation, AT&T Comcast, to develop and provide a variety of correlated products, which would increase the economies of scope. Secondly, because the consumers’ demands for high-tech are increasing, the future of broadband technology is very impressive. Comcast has the potential to leading this industry if merging with AT&T. From the case analysis, AT&T Comcast will take over 22 million cable subscribers, which is about 30% of U.S. cable subscriber. Also the new company would become the largest cable operator. This would be a great opportunity for AT&T Comcast to lead the broadband industry. Thirdly, becoming the largest cable operator, AT&T Comcast will decrease the threat of programmers (Disney, Viacom and News Corp) and decrease the threat from substitutes such like DIRECTV, which is satellite operator. The best way to determine whether the acquisition is successful is to measure both revenue and expense. As I mentioned the merging between Comcast and AT&T will have great success and the new company, AT&T Comcast would gain most profit from broadband industry. In addition, Comcast believes the new company would be able to decrease the cost of capital by reducing overhead cost and cost associated with telephony and hardware expenditure.
Although the future of AT&T Comcast is potentially impressive, there are still critical issues Comcast is facing. Firstly, AT&T Broadband’s EBITDA is lower than the industry average of 40%-42% and Comcast’s cash flow is above the industry average. And the problem is how Comcast can quickly increase AT&T Broadband’s profit margins. The new company also needs to build up a management team in order to recover AT&T’s bad profit margins as well as to improve the quality of services. Moreover, Robert, the CEO of Comcast, worries that maintaining their company culture in the new company is the most important issue Comcast facing. Many mergers may not be able to get stakeholders’ understanding and fail to maintain their employees’ motivation. Several surveys have proved that culture unsuitability between two companies is a critical cause of merger failure. Culture would have a significant influence on people’s beliefs and actions. Furthermore, culture is long-standing and difficult to change in short time.