AT&T on Thursday proposed the biggest merger in cable television history, bidding $58 billion in cash and stock for MediaOne Group in a move that throws a wrench into MediaOne's existing agreement to be taken over by Comcast Corp.
The deal would make the nation's largest phone company also its largest cable system operator, a coast-to-coast behemoth with access to 26.5 million households, including 815,000 subscribers in Southern California.
Perhaps more important, the merger would significantly strengthen the presence of AT&T, a telecommunications icon, in the emerging market for "broadband" communications--the high-speed delivery of Internet, on-demand video and other digital services to homes and offices. It also may make AT&T a more effective competitor of local phone companies, potentially driving down prices for consumers. Ironically, it was the 1984 breakup of AT&T's local phone monopoly that created today's welter of independent local and long-distance phone companies.
The audacious bid came on a day dominated by multibillion-dollar telecommunications deals. Deutsche Telekom and Telecom Italia announced an $82-billion plan to merge into the world's second-largest telecom company. Meanwhile, Cox Communications--which itself had once explored bidding for MediaOne--agreed to buy the cable company Media General for $1.4 billion in cash.
AT&T's offer was the most eye-catching because of its potential to transform the one-time telephone monopoly into a dominant player in the rapidly growing communications and data world. AT&T's goal is to reach roughly 60% of the nation's households with phone, video and data services within the next three to five years.
"Together, AT&T and MediaOne will bring broadband video, voice and data services to more communities, more quickly than we could separately or, in MediaOne's case, with any other company," AT&T Chairman and Chief Executive C. Michael Armstrong said in a letter delivered Thursday to MediaOne's board.
AT&T now serves roughly 11 million cable customers directly and owns an interest in cable partnerships serving another 11 million subscribers. Directly or indirectly, its cable wires pass by--or are available to--35 million homes, roughly 35% of the nation's households.
Telecommunications industry observers said Thursday that the AT&T-MediaOne merger will probably be only one of many deals in cable and communications, as major players--including cable, long-distance, and local telephone companies--scramble to secure ownership of data-ready communications networks in an era of government deregulation.
