This take from the old bastion, one of the original telecomm pubs,
Telephony Magazine:
internettelephony.com
MIKE ARMSTRONG, CABLESPLITTER
AT&T nabs MediaOne's network, Comcast's blessing, Microsoft's money
BRIAN QUINTON
It was a whirlwind courtship that turned into a hurricane of rumored counter-offers
and side deals, but when the dust settled last week, AT&T and MediaOne got
what they wanted: the right to unite. Jilted suitor Comcast was left with
nothing—except $1.5 billion in cash, a stronger market position, new subscribers
and the promise of optimum cable telephony rates from AT&T.
“It's a very elegant win-win,” Comcast CEO Brian Roberts said at a press
conference announcing the deal.
The result should be clear sailing for AT&T's winning bid of $58 billion in stock
and cash for MediaOne—an offer that MediaOne's board of directors accepted
one week ago over Comcast's $53 billion March bid. If it goes through, the deal
will make AT&T the nation's largest cable operator with 14 million cable
customers—about 18% of the United States total—and an additional 10 million
homes passed.
Terms of the Comcast deal include giving AT&T the chance to sell local cable
telephone service in Comcast's markets. That access could bring an additional 8
million subscribers into AT&T's local phone fold, making the service available to
more than 60% of U.S. households.
Comcast will gain a breakup fee of $1.5 billion and 750,000 new subscribers
through territory swaps, for which it will pay AT&T $4550 a head, or between $3
million and $3.5 billion. Subscriber increases will come in Florida, Michigan, New
Jersey, New Mexico, Pennsylvania and the Baltimore-Washington metro area.
Comcast will relinquish systems in Atlanta; Broward County, Fla.; Chicago;
Colorado; Pittsburgh; Richmond, Va.; and Sacramento, Calif.
The result will be an East Coast cluster of Comcast networks from Union, N.J.,
through Washington that will be “the most contiguous corridor in the industry,”
said Roberts.
Comcast will also get the option to purchase 1.25 million more subscribers from
AT&T over the next three years at an expected cost of $5.7 billion. Many
subscribers will be new, said Leo Hindery, president of AT&T Broadband and
Internet.
AT&T also bought the half interest it did not own in Lensfest Communications, a
multiple systems operator (MSO) with about 1.4 million subscribers in
Pennsylvania and New Jersey. Comcast will participate in management of this
system and may ultimately acquire its customers.
The Comcast agreement and the expected MediaOne purchase will put AT&T's
negotiations with Time Warner back on track, said C. Michael Armstrong,
AT&T's chairman and CEO. Talks to hammer out a 20-year contract to carry
AT&T cable telephony to Time Warner's 12 million customers have already
missed the April 30 deadline announced last February. But MediaOne is a
stakeholder in Time Warner Entertainment—a fact that should speed
negotiations up considerably.
“If we're lucky enough to acquire MediaOne, we will immediately open those
discussions [with Time Warner] again from a different vantage point,” Armstrong
said.
Assuming the Time Warner deal goes through, and AT&T can win an agreement
to offer cable telephony to one other non-affiliated MSO, a “most favored nation”
clause in the Comcast pact will guarantee that system the lowest cable
telephony rates AT&T offers.
Microsoft's piece of the action
In a final flourish, two days after the Comcast deal, Armstrong announced a $5
billion investment in AT&T by Microsoft. Microsoft will extend an existing deal to
supply AT&T with 5 million cable set-top boxes—built on its Windows CE
client/server platform—by another 2.5 million to 5 million boxes. More important,
the software giant will ensure that its boxes will be included in two of the
showcase tests the new No. 1 cable operator will conduct this year.
"AT&T already had strong relations with Microsoft," said Armstrong. "But
MediaOne was catalytic. Now, with this agreement with Microsoft, we've agreed
to do something real."
|
