May 4, 1999 8:35 PM PDT
Comcast quits MediaOne bid, inks AT&T deal
In a brief statement, Comcast said it "has decided not to submit a revised offer" for the cable company, meaning AT&T's bid apparently will carry the day. Comcast had agreed to purchase MediaOne for $48 billion in stock on March 22, but last month AT&T made a surprise $54 billion offer of cash and stock.
Comcast will receive a $1.5 billion termination fee from MediaOne, the company said.
To sweeten the consolation prize, Comcast and AT&T announced a related agreement whereby the two companies will exchange selected regional cable systems to better cluster each company's networks, AT&T said in a statement. As the deal also includes an agreement for Comcast to deliver AT&T phone services, the switch demonstrates Ma Bell's determination to deliver local phone service via cable.
The swap will result in Comcast's gaining about 750,000 subscribers. Comcast will pay approximately $4,500 per subscriber, or about $3.37 billion in all. Comcast also will receive an option to buy 1.25 million additional subscribers from AT&T, according to AT&T.
Further, Comcast agreed to offer AT&T-branded telephone services "on an expedited basis" and at the "most favorable terms" AT&T is offering other potential partners. The phone giant has been anxious to compete in local markets, as evidenced by its recently completed acquisition of Tele-Communications Incorporated as well as its bid for MediaOne.
"These agreements are great news for millions of American families who will now have a choice in local phone service," said C. Michael Armstrong, AT&T's chairman and chief executive, in a statement.
"This transaction makes strategic sense for both companies. Geographic clustering enables more effective telephony competition," Armstrong said.
"This is a different outcome than our MediaOne proposal, but it is an elegant win-win result," said Brian L. Roberts, president of Comcast, in a statement.
MediaOne's board of directors agreed to accept AT&T's offer over the past weekend, triggering a countdown for Comcast to come up with an improved bid before Thursday. In recent days, the company had been huddling with Microsoft, America Online, and even investor Paul Allen in an effort to salvage its buyout, according to various reports.
MediaOne, for its part, had entered into confidentiality agreements with both the software maker and the leading Internet service provider, as well as AT&T.
Also today, AT&T agreed to acquire the half of Philadelphia-area cable operator Lenfest Communications, in a stock deal that could top $2 billion, Reuters reported. Lenfest has about 1.5 million customers, and is half-owned by the Lenfest family. (See related story)
The AT&T-MediaOne agreement remains subject to federal antitrust approval.
Microsoft, which has a $1 billion stake in Comcast, could not immediately be reached for comment.