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Comcast, AT&T Broadband Close Merger

AT&T has completed the spin-off of its broadband unit and merged it with Comcast Corp. , officially creating the nation's largest cable company valued at around $60 billion, including stock and debt.

The closing of the spin-off transaction Monday, which included a reverse one-for-five stock split of AT&T shares, creates a cable company serving more than 21.4 million subscribers stretched across 41 states.

The merger places Comcast, which formerly counted about 8.5 million cable subscribers, in the forefront of every emerging digital media technology of the cable industry: digital cable services, video-on-demand, and, albeit tentatively, voice over IP telephony services.

Out of its close to 22 million cable subscriber base, the newly combined company counts 6.3 million digital video customers, 3.3 million broadband customers and 1.3 million cable telephony (VoIP) customers, putting it at the top or near the top of each sub-category in the cable/technology field.

In all, about 59,000 employees work for the company.

The merger closed when AT&T shareholders received .3235 of a Comcast share for each share of AT&T they owned as of Friday, Nov. 15th. Now, AT&T shareholders own about 56 percent of the merged company, and the Roberts family, which founded Comcast, holds about a 66 percent voting interest in the new company and controls about one third of the new company's outstanding voting interest.

As part of the deal, Comcast took on more than $24 billion worth of debt from AT&T and its subsidiaries, including $5 billion worth of AT&T subsidiary trust convertible preferred securities that are held by Microsoft Corp. They can be converted into 115 million shares of Comcast.

In the reverse stock split, AT&T's common stock shareholders now receive one share of AT&T stock for every five shares they currently hold, the companies said.

Brian L. Roberts, chief executive officer of Comcast, called the closing of the transaction an historic moment for the entire Comcast family, including the company's employees, customers and shareholders.

"This vibrant new company is a leader in serving consumers with exciting new products and technologies, and is focused on providing the highest standards in customer service."

Roberts said the company would focus on bringing all of its cable systems "up to the Comcast standard," quickly moving to deploy more digital cable and data services, and continuing to deliver consistently strong financial results.

C. Michael Armstrong, who now departs his role as AT&T's chief executive to take the title of chairman of Comcast, called the closure of the deal "the birth of a leading national broadband communications media and entertainment company."

For Brian Roberts' father Ralph, who founded the beginnings of the company in Mississippi in 1963 with about 1,200 subscribers of what would become a cable company, Monday's culmination of the deal was "a breathtaking moment."

Before it aggressively bid for AT&T's broadband division last year, Comcast was the nation's third largest cable company with close to 8.5 million customers. As of Monday, after closing the $29.2 billion stock transaction to buy out AT&T's broadband division, the company had catapulted to close to twice as many subscribers as the number two cable company, owned by AOL Time Warner.

Brian Roberts has remained bullish on Comcast's plans to upgrade AT&T Broadband assets for digital cable services. AT&T's broadband plant in Colorado has often been cited by cable analysts as a laggard in upgrading to digital cable services, compared to other cable providers around the nation.

But whether Comcast can manage the capital expenditures related to expensive cable system upgrades, while maintaining its growth projections now that its total debt has risen to about $30 billion, remains the question of the moment with analysts. That's one reason the company remains aggressive about rolling out new interactive, digital cable services in order to upgrade more cable customers to new pricing plans.

Wall Street analysts have long been complimentary of the Roberts family's stewardship of Comcast's cable/media holdings. Many remain confident of its ability to manage its new debt, along with its status as the newly dominant media company in the nation.