Comcast, AT&T Shareholders OK Merger

Shareholders at AT&T and Comcast gave
their blessing to a $72 billion merger Wednesday, creating the largest
cable network in the U.S. The approval means only two hurdles remain: the
U.S. Department of Justice and the Federal Communications Commission.

Executives announced
their decision to merge in December, 2001.

If approved, the new company will keep Comcast headquarters in Philadelphia
and maintain executive offices in New York City.

The new company combines the largest and third-largest (AT&T Broadband and
Comcast, respectively) cable networks, putting its potential broadband user
reach well beyond its closest competitor, AOL Time Warner .

The deal means money in the bank for AT&T investors, who have seen their
stock value cut in half over the past year. At the AT&T shareholder
meeting, a 1-for-5 reverse stock split was also announced to bolster its price.

But more importantly, the new company — which will be called AT&T Comcast
— brings together content and network in one large whole, similar to the
content benefits AOL inherited when it bought out Time Warner last
year. Comcast owns the popular QVC, E! Entertainment and Golf Channel
properties, in addition to other entertainment properties.

Wall Street may be skeptical of the merger at first. The last time
a cable giant went through a landmark merger deal, its value quickly sank
as the two tried to integrate. Last quarter, AOL Time Warner had to write off $54
billion
.

The merger must also face the scrutiny of the FCC and Justice
Department, the same two agencies — under a different administration — that put the AOL Time Warner merger through the
wringer
to maintain a competitive environment. AT&T Comcast
will face many of the same federal and integration issues
, though both
companies have the benefit of signing open access deals with competitors
like EarthLink , United Online.

Little mentioned in the deal is Microsoft , which holds
$5 billion in preferred securities at AT&T. Officials at the software
giant have already agreed to cash it in for 115 million shares of AT&T
Comcast and a minority piece in the cable giant.

AT&T Comcast will hold about $20 billion in debts when and if the two
companies merge.

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