AT&T Corp. agreed Wednesday to sell its cable television business to Comcast Corp. for $52 billion, in the process creating a cable giant double the size of its biggest rival, AOL Time Warner Inc.
With 22 million subscribers, the new company, AT&T Comcast Corp., would be bigger than any of the nation's cable or satellite providers, reaching one of every four pay television households.
AT&T Comcast would assume about $20 billion in debt from AT&T, which has been crippled by heavy borrowing during a $120-billion cable buying spree over the last three years.
Comcast's victory marks the continuing rise to power of Brian Roberts, the 42-year-old billionaire president of the nation's third-largest cable operator.
Comcast was considered by many on Wall Street to be a dark horse to win the bidding contest because of Roberts' hostile, $41-billion offer in July to acquire the AT&T Broadband unit, the nation's largest cable operator. That offer was rejected by AT&T's board, but the company then put the cable business up for sale, prompting a bidding war among Comcast, AOL Time Warner, Cox Communications Inc. and Microsoft Corp.
After four months of intense jockeying by three bidders, AT&T's board voted unanimously Wednesday in favor of the Comcast proposal. The vote was announced after the stock market closed.
It was a sweet victory for Roberts, who was beat out by AT&T two years ago in a bid for cable operator MediaOne Group, which formed the foundation of AT&T's cable business.
The Comcast sale also helps preserve the image of beleaguered AT&T Chairman C. Michael Armstrong, whose leadership has been called into question by Wall Street because of the sinking performance of the company's long-distance and broadband operations. AT&T's stock price has lost two-thirds of its value under Armstrong, who had been in favor of keeping AT&T's cable business in hopes of salvaging his legacy by turning the unit around.
Under the deal with Comcast, Armstrong, 63, would become chairman of the new company instead of staying on at AT&T until May 2003.
Roberts would be chief executive of the new company, which would be based in Comcast's hometown of Philadelphia, and his family would have the largest block of stock.
The deal, which must be approved by regulators and shareholders of both companies, should not face significant hurdles. The deal does not appear to violate any current rules, and Federal Communications Commission Chairman Michael Powell would like to eliminate many media regulations to encourage more consolidation.
