Under the deal, AT&T will spin off its cable operations and merge them with the Philadelphia-based Comcast, the nation’s third largest cable provider. The plan calls for Comcast to pick up AT&T’s 25 percent stake in Time Warner Entertainment as well as $20 billion of AT&T’s debt.
The new company, which will be called AT&T Comcast Corp., will have more than 22 million customers. It will have a presence in 41 states and will serve subscribers in 17 of the 20 largest U.S. metropolitan areas.
Microsoft Corp. has said it will convert its $5 billion stake in AT&T Broadband into shares of the new company.
AT&T shareholders will receive one-third of a share in the new company for each AT&T share they own, while Comcast investors will receive a full share for each Comcast share in their portfolios.
The deal comes after months of heated competition between Comcast, AOL Time Warner and Cox Communications to purchase the AT&T Broadband unit. AT&T’s board rejected an earlier $41 billion bid from Comcast in July.
Heading up the new company will be C. Michael Armstrong, currently AT&T’s chairman and chief executive, who will put off plans to retire in 2003 to chair the new company.
“AT&T Comcast will create value for its customers, shareowners and employees by bringing more services to more people more quickly,” Armstrong said.
Brian Roberts, now Comcast’s president, will become the new AT&T Comcast’s chief executive.
“Bringing together AT&T Broadband and Comcast creates a company with a national footprint and a powerful growth platform uniquely positioned to efficiently deliver content and entertainment to its customers,” he said.
Roberts said the new company would look to expand its services in the realms of digital cable television and broadband Internet access, as well as furthering video-on-demand and telephone systems.
The two companies expect the deal to close by the end of 2002. Federal regulators must still approve the merger, although analysts say it shouldn’t meet much resistance.
If approved, company officials say the new AT&T Comcast will be headquartered in Philadelphia.
Chuck Noski, AT&T’s chief financial officer, told the Associated Press a transition team will decide the fate of the AT&T Broadband headquarters in Denver and will determine the new company’s composition. AT&T Broadband has some 40,000 workers, while Comcast employs 35,000.