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COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND

We will be the company to look to first for the communications products and services that
connect people to what’s important in their lives.
—Comcast credo

Introduction

In December 2001, Brian Roberts, president of cable operator Comcast Corporation,

walked out of the New York offices of AT&T’s law firm, Wachtell Lipton, wondering what to
do next. After a six-month process of vying for the nation’s largest cable operator, AT&T
Broadband, Roberts had just received word that Comcast’s $72 billion offer had won the auction.
Comcast, the cable industry’s third largest operator, would merge with industry leader AT&T
Broadband to form a company with over $20 billion in revenue and an unparalleled distribution
with a presence in 22 of the nation’s top 25 markets. See Exhibit 1 for the combined presence.

Roberts and Comcast Cable President Steve Burke immediately began to consider their
postmerger integration strategies. What would be important and how should they prioritize their
activities?

About Comcast

Comcast was founded in 1963 through a partnership led by the soft-spoken Ralph
Roberts, with a single cable system in Tupelo, Mississippi, that had 1,200 customers.1 In 1969,
the partnership was renamed Comcast Corporation and incorporated in Pennsylvania. In 1972,
the company had its first public offering and was listed on the NASDAQ stock market. See
Exhibit 2 for the company’s milestones.

1
Comcast Corporation, “Key Events,” Comcast Corporation, http://www.cmcsk.com/phoenix.zhtml?c
=147565&p=irol-events, (2004).

This case was prepared by Nicholas Goodman (MBA ’04) and John O. Wynne, Jr. (MBA ’04), under the
supervision of L. J. Bourgeois III, Paul H. Hammaker Research Professor of Business Administration. It was written
as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation.
Copyright © 2004 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.
To order copies, send an e-mail to sales@dardenpublishing.com No part of this publication may be reproduced,
stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic,
mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.

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For years, Comcast grew organically rather than acquiring additional assets until 1986,
when the company began to aggressively acquire new systems, doubling its size to 1.2 million
customers with the purchase of Group W Cable.2 The company also began to invest in
programming assets in 1995 with its investment in QVC, a home shopping television network.

Brian Roberts, one of five children, joined Comcast at its entry level by climbing poles to
install cable lines. In 1990, when he became president, the company had 2.3 million subscribers
and an interest in cable network QVC. By year’s end 2001, Comcast had 8.5 million subscribers,
a $1 billion investment from Microsoft, and a portfolio of entertainment assets that included the
NHL Philadelphia Flyers, the NBA Philadelphia 76ers, three regional sports networks, and
interests in QVC, E! Entertainment Television, the Golf Channel, and the Outdoor Life Network
(see Exhibit 3 for Comcast cable acquisitions and Exhibit 4 for a company overview).3

Over the years, Comcast gained a reputation as arguably the industry’s best operator. The
company avoided the burdensome debt levels that hampered some of its peers and focused on
growing its subscriber base, enabling Comcast to become one of the best-capitalized cable
companies. See Exhibit 5 for comparable analysis. Comcast had also shown itself to be a clever
player even in defeat. In 1999, it announced a $48 billion merger with MediaOne, a major cable
operator with over 5 million subscribers. During the closing of its deal with Comcast, AT&T
trumped Comcast’s offer and bought MediaOne for $54 billion in cash and stock. Nevertheless,
Roberts managed to negotiate a solid consolation prize: a $1.5 billion breakup fee plus the
opportunity to purchase AT&T cable systems serving approximately 2 million new subscribers.4

The State of the Cable Industry

In 1996, Congress passed legislation that allowed competitive distribution technologies

such as wire-based, wireless telephony, and wireless cable to compete with traditional cable and
direct satellite broadcast in what had been an exclusive industry. This legislation led to
significant investment and consolidation in the industry. Cable operators began to upgrade their
networks to provide broadband delivery of high-speed Internet, telephony, and digital cable
services to consumers. Never before had consumers in both rural and urban areas had so much
access to information, entertainment, and communications options.

The turn of the century brought increased demand for value-added services, such as
video-on-demand, interactive TV, and telephony. However, given the high costs associated with
those new services, operators were slow to deploy them to consumers. For example, cable
telephony carried a $700 acquisition cost per subscriber for AT&T Broadband.5 Between 1996

2
Comcast Corporation, “Key Events,” Comcast Corporation.
3
Comcast Corporation, “Key Events,” Comcast Corporation.
4
Kurt Oeler, “Comcast Quits MediaOne Deal, Inks AT&T Deal,” CNET News.com, 4 May 1999,
http://news.com.com/2100-1033-225408.html?legacy=cnet, (2004).
5
Niraj Gupta, Comcast Corporation: Merger with AT&T Broadband Redefines the Company and the Cable
Industry Landscape, (New York, NY: Salomon Smith Barney), 4 January 2002.

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and 2001, over $62 billion was invested to create new digital services and upgrade existing cable
systems.6 Many operators either did not have the capital resources or could not develop new
digital models fast enough and were forced to consolidate. In 1990, the top eight cable operators
controlled approximately 53% of the industry. Competition increased in the mid-1990s as
satellite provider DIRECTV began its service in 1994 with EchoStar following in 1996. In 1996,
US West, Inc., acquired Continental Cable Company and came to be known as MediaOne.
AT&T Broadband entered the business in 1998, and soon thereafter Microsoft co-founder Paul
Allen formed Charter Communications. In 1998, Comcast purchased 40% of Jones Intercable
and bought the remaining stake in 2000. By 2001, the industry had experienced significant
consolidation: AT&T Broadband had purchased TCI and MediaOne, and incumbent cable
companies, such as Adelphia Communications and Cox Communications, had acquired smaller
operators. At the end of 2001, the top eight cable and satellite providers controlled 79% of the
industry. The arrows in the chart below represent the companies that were acquired.

Top 8 MSOs–1990 Top 8 MSOs–1997 Top 8 MSOs–2001

Rank Company Subs (m) Rank Company Subs (m) Rank Company Subs (m)
1 TCI 11.3 1 TCI 17.2 1 AT&T Broadband (1998) 13.8
2 Time Warner Cable 6.0 2 Time Warner Cable 11.8 2 Time Warner Cable 12.7
3 Continental 2.5 3 MediaOne 5.0 3 DirecTV (1994) 10.7
4 Comcast 2.3 4 Comcast 4.4 4 Comcast 8.5
5 Cox 1.5 5 Cox 3.3 5 Charter (1998) 7.0
6 Cablevision 1.4 6 DirecTV (1994) 3.3 6 EchoStar (1996) 6.8
7 Jones 1.4 7 Cablevision 2.9 7 Cox 6.2
8 Newhouse 1.2 8 Jones 1.5 8 Adelphia 5.8
27.6m 49.4m 71.4m

% of total 53% % of total 70% % of total 79%

Source: NCTA, ABN Amro and Company reports. Note: EchoStar had 1.0m subscribers

AT&T Broadband Divestiture

Prior to 1995, AT&T was one of the largest telecommunications companies in the world
with revenues coming from telecommunications services, global information solutions, and
network systems (see Exhibit 6 for 1995 corporate structure). Bell Labs, which carried out a
broad program of fundamental research, served all three business units. In 1995, AT&T
announced its intention to break up the company, representing the largest voluntary breakup of a
company in the history of business.7 All three businesses were to be spun off with two separate
public offerings over the next three years. The Networking Systems Group and Bell Labs
became independently traded as Lucent in 1996. Global Information Solutions, which was
formed with the $7.4 billion purchase of NCR in 1990, began independent trading in 1997. The
NCR acquisition and its subsequent integration proved to be a disaster, with continued losses

6
National Cable & Television Association, “Cable Industry Infrastructure Expenditures 1996–2003,” NCTA,
http://www.ncta.com/Docs/PageContent.cfm?pageID=314, (2004).
7
AT&T Corporation, “A Brief History: The New AT&T,” AT&T Corporation, http://
www.att.com/history/history5.html, (2004).

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negatively impacting AT&T’s earnings. The Telecommunications Services unit remained under
the AT&T brand, which continued to trade under the famous “T” stock symbol.

The purpose of this breakup was for AT&T to evolve from a long distance phone
company to an integrated voice and data communications company. AT&T’s repositioning was
further spurred by the impending and eventual passing of the Telecommunications Act of 1996,
which would open the access of phone lines to cable companies and vice versa. The U.S. Federal
Communications Commission (FCC) Chair, William Kennard, predicted, “phone lines would
carry TV shows, cable lines would carry phone calls, and viewers would be showered with new
competition, more channels, and lower prices. Multiple pipes is no dream.”8 AT&T was
particularly interested in using cable lines to offer a range of phone services to local telephone
customers in what is known as internet telephony. At the time, the regional Bells held a virtual
stranglehold on the $100 billion-a-year business.

C. Michael Armstrong became chair and CEO in November 1997 with the mission to
continue AT&T’s evolution from a long-distance company to an “any-distance” company.9 Over
the next three years, Armstrong spurred acquisitions and upgrades to AT&T’s infrastructure to
help manage Internet protocol and other data traffic and to help establish local connections to
business customers. AT&T also acquired Teleport Communications Group and IBM’s Global
Network business and merged with two large cable companies, TCI and MediaOne, to use cable
lines to compete with the regional Bells’ local phone market dominance.

In total, Armstrong spent over $100 billion to assemble the cable business. AT&T
acquired both TCI and MediaOne for approximately $4,100 per subscriber.10 It was an exorbitant
cost, but one that was indicative of the high-flying dot-com era. At the time, the capital was
available and the regulatory structure ripe to help transform AT&T. Operating as AT&T
Broadband, the unit became the largest cable company in the United States.

By 2000, the telecommunications industry was in a meltdown. Multiple acquisitions, a

long distance price war, slow adoption of new technologies, and a dry-up of the capital markets
left AT&T and other industry leaders in danger. Between January and October of 2000, AT&T
lost $70 billion in market value. AT&T’s market value had sunk from $150 billion in 1998 to
$60 billion in 2000. Their debt rose from $6 billion to $36.5 billion over that same time frame.11
The company faced credit downgrades, a looming recession, and a long distance price war.
Furthermore, the AT&T Broadband unit was underperforming the rest of the industry. AT&T
Broadband had operating margins of approximately 20% in 2000 compared to an industry

8
Deborah Solomon and Robert Frank, “Broad Bands: Comcast Deal Cements Rise of an Oligopoly in the Cable
Business—Behind Consolidation Trend: Pressure from Satellite, High Programming Costs—How Roberts Family
Did It,” Wall Street Journal, 21 December 2001, A-1.
9
AT&T Corporation, “A Brief History: The New AT&T,” AT&T Corporation,
http://www.att.com/history/history5.html, (2004).
10
AT&T Corporation, “News Release,” http://www.att.com/news/item/0,1847,4135,00.html, (2004).
11
AT&T Corporation, “IR Site Map,” AT&T Corporation, <http://www.att.com/ir/sitemap.html, (2004).

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average of 40% to 42%.12 The company’s low margin performance could be attributed to the
outdated infrastructure inherited from its TCI acquisition and its aggressive roll-out of digital,
broadband, and telephony services. In addition, the company had not upgraded its systems due to
a capital crunch that was affecting all telecommunications companies. As Tom Evslin, former
CEO of Internet Telephony firm ITXC and a former AT&T executive stated, “the situation
AT&T finds itself is a little bit like General Cornwallis surrendering to Revolutionary forces.”13

In an effort to hold off potential hostile takeovers, Armstrong announced the complex
plan to analysts on October 24, 2000 called Project Grand Slam that would break AT&T into
four pieces and create separate tracking stocks to highlight their value (see Exhibit 7 for 2000
corporate structure). The announcement caused AT&T’s stock to sink further, falling from
$26.87 to $23.37 on the day of the announcement (see Exhibit 8 for stock price performance).

Comcast Acquisition Strategy

In the spring of 2001, Denis Hersch, a partner at Comcast’s law firm Davis, Polk, and
Wardwell drafted a memo and sent it to Comcast President Brian Roberts. The four-page memo
recommended that Comcast, the cable industry’s third-largest operator, launch an unsolicited
offer for industry leader AT&T Broadband.14

Along with AT&T’s precarious financial position, the pressure for consolidation at the
time in the industry stemmed from some broader changes that were occurring in the media
world. Programmers such as Disney, Viacom, and News Corp. were using their increasing power
to charge cable companies higher fees for the programming they carried. To resist continued rate
increases, cable companies needed comparable reach and scale.

Additionally, cable companies faced a growing threat from satellite operators who were
continuing to lure away customers. DIRECTV, for example, signed an agreement with the
National Football League in which their subscribers could purchase the “NFL Sunday Ticket”
package allowing them access to the majority of games telecast nationwide. While cable
operators were limited by the government to the size of national coverage and the number of
franchises they were awarded, satellite companies were free to compete with cable companies
nationally. Although competition from satellite operators would remain fierce, the threat of new
entrants in the cable industry was minimal given the significant costs associated with
programming expenses and deploying digital networks.

12
Richard Bilotti, Megan Lynch, and Benjamin Swinburne. Analyzing the AT&T Broadband/Comcast Merger.
New York, NY: Morgan Stanley, 3 May 2002.
13
Solomon Deborah, “Last Call: Under Rising Pressure, AT&T’s CEO Tries to Hold on to an Icon—Loaded
down with Debt, Hit by Competition, Firm May Be Sold off in Pieces—A Losing Battle with the Bells,” Wall Street
Journal, 16 November 2001, A-1.
14
Solomon and Frank, 1.

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Heightening the urgency of a Comcast bid was the position of Cox Communications, a
mid-size operator in the rapidly consolidating industry. Cox was concerned that unless it made a
deal with AT&T it would become a target itself. Additionally, Cox and AT&T both believed in
an internet telephony strategy designed to differentiate them in the marketplace by bundling the
products offered to customers. Other potential challengers would include AOL Time Warner,
Charter Communications, Walt Disney Company, and Microsoft, each with their own strategic
advantages.

Hersch’s memo outlined potential tactics to take advantage of AT&T’s weaknesses as

well as plans for a long public battle in what would likely become an auction of AT&T’s cable
assets. AT&T and Comcast pursued two very different cable strategies—one aimed at offering
additional value-added services and one focused solely on cable, which would no doubt prove
troublesome for any merged company.15 AT&T was known for spending vast sums of money to
upgrade its systems to prepare them for a new generation of broadband services, such as
telephony, high-speed internet access, and other new features. Comcast lagged in telephony,
preferring instead to follow a more traditional strategy of delivering simple cable transmission
without emphasizing new services. This decision might influence AT&T’s choice of partners,
should an acquisition take place.

On July 8, 2001, Brian Roberts launched a $58 billion unsolicited bid valuing AT&T
Broadband at $4,500 per subscriber, reflecting a significant premium to the price per subscriber
AT&T Broadband had historically paid to acquire its systems.16 The Comcast bid was quickly
rejected by the AT&T board (see Exhibit 9 for letter sent to C. Michael Armstrong).17
Nevertheless, the bid sent a signal to the industry that AT&T Broadband was “in play.”

Acquisition Objectives

Comcast believed that AT&T Broadband would give it the necessary scale and leverage
to compete in an industry that was facing increased programming fees and higher capital
expenditures. AT&T’s assets were highly attractive as they were well-clustered, contiguous to
existing Comcast systems and possessed attractive demographic appeal for advertisers. The new
company would become the nation’s largest cable operator with over 22 million cable
subscribers, six million digital cable subscribers, 3.5 million high speed data subscribers and one
million cable telephony subscribers in 2002.18 AT&T Comcast would have a significant top-10
market presence and 70% of the company’s subscribers would be located in the country’s top 20
markets (see Exhibit 10 for top 50 market competitive analysis).19

15
Solomon and Frank, 1.
16
AT&T Corporation, “News Release,” http://www.att.com/news/item/0,1847,4135,00.html, (2004).
17
Comcast Corporation, April 29, 2002 Amendment No. 2 to Form S-4, (Philadelphia: Comcast Corporation,
2002), II-2 and II-3.
18
Jessica Reif Cohen, Nathalie Brochu, and Christopher M. Giordano. Comcast Corp: Comcast Wins AT&T
Broadband….Finally! New York, NY: Merrill Lynch, 28 December 2001.
19
Cohen, Brochu, and Giordano.

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Comcast, known for its management prowess in integrating and improving the operations
of acquired companies, believed it could immediately more than double AT&T Broadband’s
lackluster 20% EBITDA (earnings before interest, taxes, depreciation, and amortization) margins
to an industry average of 40% to 42%.20 The companies also expected to achieve significant cost
savings as the larger platform would allow AT&T Comcast to capture pricing concessions from
programmers and vendors. Comcast believed that nearly $2 billion of annual operating synergies
could be extracted from the renegotiation of programming contracts, reduced overhead, and a
reduction in costs associated with telephony and hardware procurement capital expenditures.21
The new company would have a lower cost of capital, which would enable it to develop new
programming, buy underdistributed programming, and develop new value-added services. The
new scale of 22 million subscribers would also give the operator more bargaining leverage as
vertically integrated programmers became more powerful. The additional scale that the
acquisition provided would also allow for management, marketing budgets, and the deployment
of new services to be leveraged across a larger customer base.

Negotiations

Upon the launch of its unsolicited bid, industry rumors began to swirl that AOL Time
Warner, Cox Communications, Charter Communications, Walt Disney Company, and Microsoft
were considering making bids for control of the nation’s largest distribution platform into the
home.

In its unsolicited $58 billion bid announced in July, Comcast would issue 1.05 billion
shares of stock valued at $44.5 billion and assume $13.5 billion of debt for AT&T Broadband’s
13.8 million subscribers and other cable joint ventures.22 In its rejection of this offer, AT&T’s
board cited three major objections: value, governance, and the future of cable telephony.23

To address those concerns, Comcast offered AT&T an equity position that would leave
AT&T with 56% of the economic power and 66% of the voting power of the combined entity.
The controlling shareholders of Comcast, the Roberts family, agreed to reduce their voting stake
from the 42% previously proposed to approximately 33%. Each company would contribute five
members to the new board of directors and jointly select two additional members. AT&T
Comcast Corporation would be headquartered in Philadelphia, Pennsylvania, and maintain
executive offices in New York, New York. In the move that eventually swayed AT&T’s board of
directors, Comcast also agreed to commit to the deployment of telephony across the 38 million
homes that are passed by the company’s systems.24

20
Bilotti, Lynch, and Swinburne.
21
Cohen, Brochu, and Giordano.
22
Shapiro, Douglas S., Michael L. Savner and Jeffrey R. Toohig. “Comcast Corp: If at First You Don’t
Succeed…” New York, NY: Banc of America Securities, 20 December 2001.
23
Shapiro, Savner, and Toohig.
24
Shapiro, Savner, and Toohig.

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After unsuccessfully bidding for TCI in 1997 and MediaOne in 1999, Comcast finally
won ownership of those properties when it finalized its $72 billion agreement to acquire AT&T
Broadband in December 2001. Interestingly, AT&T Broadband’s CEO retired during the process
in October 2001 and was replaced with MediaOne’s former CEO who brought in two additional
former MediaOne executives. Through its issuance of 1.2 billion shares and assumption of $20
billion of debt, above the $13 billion initially offered, Comcast acquired AT&T Broadband’s
13.8 million wholly owned subscribers, its other cable joint ventures, and the company’s 25.5%
stake in Time Warner Entertainment (TWE) valued at approximately $9 billion. Comcast offered
AT&T shareholders 0.34 shares of the new AT&T Comcast, while each Comcast shareholder
received one share of AT&T Comcast for each share owned. Comcast also agreed to assume the
$5 billion convertible preferred security held by Microsoft. Microsoft subsequently agreed to
convert this security into 115 million new AT&T Comcast shares.25 In its prior unsolicited bid in
July, Comcast did not include the assumption of the TWE stake or the Microsoft preferred, but
felt compelled to change the terms of its agreement given the significant interest AT&T
Broadband generated from other parties. To effect the transaction, AT&T would spin out AT&T
Broadband in a tax-free transaction that would be merged with Comcast forming AT&T
Comcast Corporation. Pro forma for those transactions, AT&T shareholders would have a 56%
economic ownership stake, Comcast shareholders a 42% economic ownership stake, and
Microsoft would own approximately 5% of the new entity.

What does Comcast do now?

Brian Roberts, now back at the company’s headquarters in Philadelphia, sat back in his
office chair thinking about the challenging task that lay before him. He knew the company’s
postmerger integration strategy would be critical. Immediately upon announcement, Roberts
appointed a transition team to oversee the merger prior to its close, which was expected in
approximately one year. The team would consist of Comcast President Steve Burke, AT&T CFO
Chuck Noski, AT&T Broadband CEO Bill Schleyer, and Comcast Executive Vice President
Larry Smith.

From an operational perspective, Roberts and Burke hoped to quickly bring AT&T
Broadband’s EBITDA margins in line with the industry average of 40% to 42%. To achieve this,
Roberts’ integration priorities were focused on its new organizational structure, the stemming of
basic subscriber losses, accelerating the digital upgrading of systems, expanding high-speed data,
improving digital/pay profitability, focusing on telephone efficiency, improving customer
service, and launching the new Comcast brand.

While he had the integration team in place, Roberts questioned where they should begin.
Roberts also wondered how he would measure the team’s success. He began to think about what
kind of company he wanted AT&T Comcast to become. How would the new leadership team be
assembled? See Exhibit 11 for Comcast’s executives’ biographies and Exhibit 12 for AT&T
Broadband’s executives’ biographies. How would they manage a national corporation with
operations in 41 states? Maintaining a family-like culture was important to Roberts as his father
25
Shapiro, Savner, and Toohig.

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often stressed the importance of values, respect, and integrity within the organization. He
wondered about the best way to communicate with his employees, customers, and shareholders,
and although he recognized the need for a workforce reduction, he questioned how to approach it
while keeping the remaining employees focused and motivated. How would he get all
stakeholders to understand the rationale for the deal and its business goals, and get the
stakeholders excited about the new AT&T Comcast?

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Exhibit 1
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
AT&T Comcast Combined Presence
22 Million Subscribers Reaching Approximately 30% of U.S. Cable
Subscribers

Seattle (1.0)
Twin
Portland (0.4) Cities Pittsburgh (0.6)
(0.3)

Salt Chicago Harrisburg

Lake (1.7) Boston/Hartford
Detroit (0.5)
City (2.2)
Denver (0.6) (1.0)
(0.3)
NY/NJ/CT (0.8)
Sacramento (0.6)
Philadelphia (1.8)
Bay Area (1.8) Nashville (0.3) Baltimore/Washington, D.C. (1.5)

Los Dallas
Angeles (0.6) Atlanta (0.6)
(0.5)

Jacksonville (0.3)

Subscribers (in millions)

AT&T Broadband
Miami
Comcast (0.8)

Note: Systems of more than 250,000 subscribers.

Source: Robertson Stephens

($ in millions)
FY December 2002E Comcast + AT&T Broadband = AT&T Comcast
2002E Total Revenue $11,134.7 $10,305.0 $21,439.7
2002E Total EBITDA $3,424.4 $2,520.0 $5,944.4
Total EBITDA (OCF) Margin 30.8% 24.5% 27.7%
Total Company EV $42,851.0 $61,867.2 $104,718.2
Total Company EV/EBITDA 12.5x 24.6x 17.6x
Cable EV $28,560.5 $49,367.2 $77,927.7
2002E Cable Revenue $5,922.2 $10,305.0 $16,227.2
2002E Cable EBITDA $2,552.7 $2,520.0 $5,072.7
Cable EBITDA (OCF) Margin 43.1% 24.5% 31.3%
Cable EV/EBITDA 11.2x 19.6x 15.4x
Cable EV/Sub $3,338 $3,623 $3,513

2002E Subscriber Data (000s)

Homes Passed 14,207.1 24,860.1 39,067.2
Basic Subs 8,555.8 13,627.8 22,183.6
Digital Subs* 2,334.3 4,254.7 6,589.0
Data Subs 1,446.4 2,108.0 3,554.4
Telephony Subs 1,263.8 1,263.8
*Assumes 1.3 digital STBs per household.
Source: Company reports and Robertson Stephens estimates.

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Exhibit 2
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
Comcast Company Milestones

1963 Founded by Ralph J. Roberts, Daniel Aaron, and Julian A. Brodsky.

1972 Completed initial public offering on NASDAQ stock market.
1986 Doubled in size to 1.2 million cable customers with the purchase of 26% of Group W Cable.
1988 Purchased 50% of Storer Communications raising the number of Comcast subscribers to over 2 million
and making Comcast the 5th largest cable operator.
Entered the cellular telecommunications field with the purchase of American Cellular Network
Corporation (AMCELL), whose New Jersey and Wilmington, Delaware, service territory covered a
population of 2 million.
1990 Brian L. Roberts elected president.
1992 Combined its AMCELL properties with those of Metrophone, tripling the population area served to 7
million.
1994 Acquired Maclean Hunter’s U.S. cable operations adding 550,000 customers and becoming the third
largest cable operator with approximately 3.3 million customers.
1995 Purchased a 57% stake in QVC assuming management of the world’s leading electronic retailer.
Acquired E.W. Scripps’ cable systems, adding 800,000 subscribers and bringing Comcast’s customer
total to 4.3 million.
1996 Formed Comcast-Spectacor, a sports venture owning and operating the NHL Philadelphia Flyers, the
NBA Philadelphia 76ers, the First Union Spectrum, and the First Union Center.
Announced the formation of a regional sports channel, Comcast SportsNet.
1997 Microsoft invested $1 billion in Comcast.
Acquired a 40% controlling interest in E! Entertainment in a partnership with Disney.
1998 Acquired Jones Intercable, Inc. for 1.1 million additional customers.
Acquired 406,000 subscribers from Prime Communications.
Comcast U.K. Cable Partners is sold to NTL, Inc.
1999 Comcast Cellular sold to SBC Communications of San Antonio for $1.7 billion.
Acquired Greater Philadelphia Cablevision, Inc., a subsidiary of Greater Media, Inc., serving 79,000
cable customers in Philadelphia.
Comcast and MediaOne announced a $60 billion merger, including debt. When the merger agreement
was terminated, Comcast received a $1.5 billion termination fee and announced an agreement to acquire
2 million AT&T subscribers.
2000 Acquired Lenfest Communications, Inc., adding 1.3 million cable subscribers.
Completed cable system swaps with Adelphia and AT&T, gaining Adelphia customers in six states and
AT&T customers in five states.
2001 Acquired Home Team Sports and combined it with Comcast SportsNet under a new division called
Comcast Regional Sports Television.
Acquired select AT&T cable systems in six states adding 595,000 customers.
Launched high definition and video-on-demand television service.
Acquired controlling interest in the Golf Channel and Outdoor Life Network.
Acquired 115,000 AT&T subscribers in Baltimore, Maryland.
Comcast and AT&T Broadband announced their agreement to merge.
Source: Comcast Web site.

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Exhibit 3
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
Recent Comcast Cable Acquisitions

Year Seller Subscribers Price ($000) Price/Sub

1999
June Greater Philadelphia 79,000 $291,700 $3,692
2000
January Lenfest Communications 1,316,000 $7,340,000 $5,578
(1)
January Garden State Cablevision 216,000 -
(2)
February CalPERS 288,900 $750,000 $2,596
(3)
March Jones Intercable 1,100,000 $3,982,300 $3,620
December AT&T (swap) 65,000 -
2001
(4)
January AT&T Corp 585,000 $2,689,000 $4,597
April Adelphia Communications (swap) 5,000 -
June AT&T 112,000 $518,700 $4,631
(1) Included in Lenfest acquisition. Consolidated ownership with Lenfest transaction. Previously Comcast and Lenfest were 50% owners.
(2) $750m paid to acquire 55% of calPERS that was previously not owned by the company. Total calPERS subscribers were 642,000.
(3) Reflects two transactions: the acquisition of a 40% stake in Jones in 1998, and the consolidation in 2000. Price reflects all compensation paid.
(4) Comcast paid for subscribers with 63.9m of shares of AT&T stock, of which 39.6m shares were valued at $54.41 per share in the transaction.
The remaining portion of the shares were exchanged at market value.
Source: BB&T Capital Markets and Company reports.

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Exhibit 4
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
Comcast Company Overview

Comcast Corporation

Cable Commerce Content

-8.5 million basic subscribers -QVC -Flyers and 76ers (66%)
-2.3 million digital -2nd largest grossing TV -Comcast SportsNet (various)
subscribers Network -E! Entertainment (40%)
-1.4 million data subscribers -80 million homes -The Golf Channel (91%)
-Outdoor Life Network
(100%)

2001 revenue: $5,171 million 2001 revenue: $3,917 million 2001 revenue: $666 million
2001 EBITDA: $2,053 million 2001 EBITDA: $722 million 2001 EBITDA: $159 million
Margin : 40% Margin: 18% Margin: 24%
Source: Morgan Stanley, BB&T Capital Markets, and company reports.

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Exhibit 5
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
Comparable Analysis–Cable and Satellite Companies

Cable Companies Total/ Satellite Companies Total/

Comcast Charter Cox Adelphia Cablevision Average DirecTV EchoStar Average
($ and shares in millions)

Stock Price (01/07/02) $35.34 $15.66 $40.15 $32.66 $46.93 $16.70 $28.92
FD Shares Out. 965 693 626 179 175 1,396 609
Market Value of Equity $34,103 $10,852 $25,134 $5,846 $8,213 $23,307 $17,606

LT Debt(1) $11,490 $15,650 $8,900 $14,850 $6,650 $1,155 $3,726

Cash and Cash Equivalents 660 20 90 130 130 1,925 4,261
Net Debt $10,830 $15,630 $8,810 $14,720 $6,520 -$770 -$535

Non-Conv. Pfd. $0 $0 $0 $476 $1,544 $0 $0

Non-cable Assets/Investments $11,800 $0 $6,417 $1,830 $2,830 $6,215 $592

Cable Total Enterprise Value $33,133 $26,482 $27,527 $19,212 $13,447 $119,801 $16,322 $16,480 $32,802

Est. 2001 Subscribers (m) 8.46 7.00 6.26 5.69 3.01 30.41 8.77 6.83 15.60
TEV/Subscribers $3,916 $3,786 $4,401 $3,374 $4,467 $3,939 $1,862 $2,413 $2,103
Est. 2002 Subscribers (m) 8.55 7.07 6.32 5.74 3.03 30.70 9.74 8.18 17.92
TEV/Subscribers $3,877 $3,748 $4,357 $3,349 $4,433 $3,903 $1,675 $2,016 $1,831

Est. 2001 EBITDA $2,053 $1,820 $1,560 $1,430 $880 $7,743 $214 $392 $606
TEV/EBITDA 16.1x 14.6x 17.6x 13.4x 15.3x 15.5x 76.3x 42.0x 54.1x
Est. 2002 EBITDA $2,540 $2,020 $1,750 $1,620 $990 $8,920 $546 $942 $1,488
TEV/EBITDA 13.0x 13.1x 15.7x 11.9x 13.6x 13.4x 29.9x 17.5x 22.0x

Net Debt/2001 EBITDA 5.3x 8.6x 5.6x 10.3x 7.4x 7.4x NM NM NM

(1) LT Debt includes debt and preferred for DirecTV and EchoStar.
Source: BB&T Capital Markets, Deutsche Banc Alex Brown and Company reports.

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Exhibit 6
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
AT&T 1995 Corporate Structure

AT&T
Corp.
Telecommunications Services Global Information Solutions Network Systems Group Bell Labs
- Voice, Data, and Imaging - Formerly NCR Corp. - Installs and maintains systems - Designs and develops new
products

Note: AT&T did not break out segment financials for its strategic operating units. In 1996, AT&T spun off AT&T
Bell Labs and the Network Systems Group. Global Information Solutions was spun off in 1997.

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Exhibit 7
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
AT&T 2000 Corporate Structure

AT&T Corp.

AT&T Business AT&T Consumer AT&T Broadband AT&T Wireless

- Voice, Data, and IP - Voice and Dial-Up - 13.8m subscribers TWE, - 15.7m subscribers

2000 revenue: $28,886m 2000 revenue: $18,398m 2000 revenue: $9,375m 2000 revenue: $10,448m
2000 EBITDA:
$10,200m 2000 EBITDA: $7,060m 2000 EBITDA: $1,902m 2000 EBITDA: $1,653m
Margin: 35% Margin: 38% Margin: 20% Margin: 16%
Note: In 2001, AT&T spun off AT&T Wireless. Source: ABN Amro, and company reports

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Exhibit 8
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
1998–2001 Stock Price Performance: Comcast versus
AT&T and Dow Jones Industrial Average

Comcast

“Grand Slam”
Dow Jones

AT&T

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Exhibit 9
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
Unsolicited Bid Letter Dated July 8, 2001 sent to C. Michael
Armstrong, Chair and CEO, AT&T Corp.

Dear Mike:

Over many months of discussions, we have shared a vision that AT&T Broadband and
Comcast should be combined to create the world’s leader in broadband communications. We
believed those discussions were progressing toward a tax-free transaction that would
dramatically accelerate your own plan to separate the broadband company. It is unfortunate that
we were not able to agree on a basis for continuing our dialogue. Accordingly, we submit this
offer to you for consideration by your board before a proxy statement relating to your broadband
tracking stock proposal is sent to your shareholders later this month.

Under our proposal, Comcast would issue 1.0525 billion shares with a value of $44.5
billion based on Friday’s closing price and assume $13.5 billion in debt for your core broadband
business, which is composed of your 13.5 million cable subscribers as well as your joint venture
interests. In addition, we are prepared to acquire your interests in TWE, Cablevision, and
Rainbow by assuming more debt and issuing more equity to reflect their values. Under our
proposal, your shareholders would own a majority of the economic and voting interests of the
combined company in a transaction that would be tax-free to AT&T and all shareholders.

Our proposal values your core broadband business at $58 billion, which represents 30×
both 2000 EBITDA and annualized first quarter 2001 EBITDA. AT&T shareholders would
receive Comcast shares valued at $12.60 per AT&T share based on Friday’s closing price, while
retaining complete ownership of AT&T’s historical communications business that according to
published reports has a value approaching $70 billion on a standalone basis. This combined
value is dramatically higher than your current market value per share of $16.80 after giving
effect to the spin-off of AT&T Wireless.

Your shareholders would receive significantly more value through a combination with
Comcast than through your planned restructuring. Not only does our proposal avoid the market
risks, costs, and uncertainties inherent in the planned broadband IPO, it values your business at a
significant premium to your potential public market valuation. At 30× AT&T Broadband’s
annualized first quarter 2001 EBITDA, our offer far exceeds the trading multiple of any publicly
traded broadband company. Put another way, our proposal delivers a very substantial premium
over published reports of the estimated value of your broadband business.

After combining our broadband businesses, your shareholders will retain a majority of
the future appreciation resulting from substantial combination benefits. Upon full integration of
our broadband businesses, we expect the combination benefits will amount to at least $1.25
billion annually. This benefit could eventually increase to between $2.6 and $2.8 billion annually

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Exhibit 9 (continued)

as we work together to raise the level of your margins. None of those figures take account of any
new content, Internet, or other value-creating opportunities. Because of those combination
benefits, merging our broadband companies will clearly be value accretive to both groups of
shareholders.

Given the strength of Comcast’s balance sheet, we are confident that the new company
would have an investment grade debt rating, a view that is shared by our financial advisors,
Morgan Stanley, JP Morgan, and Merrill Lynch.

We understand that there were concerns within AT&T about Comcast’s voting structure.
As you know, multiclass structures are common in our industry and have not affected stock
trading values. Our Class A Special shares have outperformed the cable composite index, the
S&P 500 and the NASDAQ stock market in each of the last one-, three-, five-, seven-, and ten-
year periods. We are confident that your shareholders would welcome our currency. In fact, 38
of your 50 largest institutional shareholders also have significant investments in Comcast.

Our proposal is subject to the negotiation of a definitive merger agreement. We are

prepared to deliver a draft merger agreement as soon as you wish. We are confident that the
combination does not present any significant regulatory issues.

In light of the significance of this proposal to both your shareholders and ours, we are
publicly releasing the text of this letter.

We hope that you will work with us to make this vision a reality.

Respectfully submitted,

Ralph J. Roberts Brian L. Roberts

Chair of the Board President

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Exhibit 10
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
Top 50 Markets Competitive Analysis
DBS Local
Total Total 2001 Basic Subscribers Channel Presence
DMA Rank Markets TV Homes Basic Subs AT&T Comcast Time Warner Charter Cox Adelphia DirecTV EchoStar
1 New York, NY 6,874,990 5,067,220 665,669 1,183,000 61,905 x x
2 Los Angeles, CA 5,234,690 3,060,982 520,000 363,000 520,541 306,348 1,255,600 x x
3 Chicago, IL 3,204,710 1,773,556 1,720,000 8,310 x x
4 Philadelphia, PA 2,670,710 2,102,883 1,792,087 65,000 7,924 x x
5 San Francisco-Oakland-San Jose, CA 2,423,120 1,865,263 1,720,000 20,407 16,300 x x
6 Boston, MA 2,210,580 2,186,010 1,750,000 167,042 186,000 x x
7 Dallas-Fort Worth, TX 2,018,120 835,401 550,000 213,052 x x
8 Washington, DC 1,999,870 1,643,952 857,591 26,304 252,000 243,000 x x
9 Detroit, MI 1,855,500 914,390 825,083 41,581 x x
10 Atlanta, GA 1,774,720 1,184,340 615,000 58,950 264,347 82,902 x x
11 Houston, TX 1,712,060 777,250 638,000 24,287 18,000 x x
12 Seattle-Tacoma, WA 1,591,100 1,120,084 970,000 47,309 1,261 x x
13 Tampa/St. Petersburg-Sarasota, FL 1,485,980 1,216,165 211,003 925,000 14,000 x x
14 Minneapolis-St. Paul, MN 1,481,050 837,359 335,000 210,000 161,782 x x
15 Cleveland, OH 1,479,020 1,031,144 418,741 75,000 415,000 x x
16 Miami/Ft. Lauderdale, FL 1,441,570 982,647 745,000 53,581 130,900 x x
17 Phoenix, AZ 1,390,750 795,125 963 613,000 x x
18 Denver, CO 1,268,230 701,930 640,000 17,327 7,000 x x
19 Sacramento-Stockton-Modesto, CA 1,159,820 727,646 600,000 83,535 x x
20 Pittsburgh, PA 1,135,290 924,676 600,000 42,408 170,000 x x
21 St. Louis, MO 1,140,370 596,133 578,777 x x
22 Orlando-Daytona Beach-Melbourne, FL 1,101,920 1,044,439 62,946 883,903 27,000 44,880 x x
23 Portland, OR 1,004,140 671,029 545,000 67,300 21,000 x x
24 Baltimore, MD 999,200 598,288 454,890 19,003 31,000 x
25 San Diego, CA 980,620 820,897 208,000 1,716 517,000 12,700 x x
26 Indianapolis, IN 963,320 595,638 190,739 124,000 10,040 x x
27 Hartford & New Haven, CT 915,940 865,302 265,000 156,283 43,494 140,000 130,500 x
28 Charlotte, NC 880,570 611,903 375,000 106,144 51,000 x x
29 Raleigh/Durham, NC 858,490 578,025 449,000 46,864 25,000 39,350 x x
30 Nashville, TN 826,090 615,749 310,012 106,000 167,244 x x
31 Kansas City, MO 820,580 610,791 97,706 313,000 28,414 x x
32 Cincinatti, OH 820,000 438,139 332,000 60,000 x x
33 Milwaukee, WI 815,640 518,665 426,000 25,810 63,000 x
34 Columbus, OH 757,860 536,827 308,000 686 54,000 x
35 Greenville-Spartanburg, NC 732,490 407,241 302,587 x x
36 Salt Lake City, UT 720,860 342,830 265,000 25,107 3,000 x x
37 San Antonio, TX 684,730 351,538 330,000 6,827 x x
38 Grand Rapids-Kalamazoo-Bat. Creek, MI 671,320 613,706 400,000 19,388 167,246
39 Birmingham (Anniston, Tuscaloosa), AL 667,650 413,827 59,926 76,000 202,237 x x
40 Memphis, TN 632,110 321,229 226,000 4,093 2,160 x
41 New Orleans, LA 629,820 462,272 32,669 135,688 266,000
42 Norfolk-Portsmouth-Newport News, VA 629,100 586,691 51,584 519,000 16,000
43 West Palm Beach-F. Pierce, FL 623,760 552,650 13,370 539,280 x
44 Buffalo, NY 621,460 529,559 114,000 10,372 400,000
45 Oklahoma City, OK 600,240 395,428 11,780 260,000
46 Harrisburg-Lancaster-Lebanon-York, PA 599,930 765,600 446,511 123,000 44,884
47 Greensboro-High Pt.-Winston Salem, NC 592,770 405,669 351,000 11,076 21,000 x
48 Louisville, KY 576,850 280,940 1,200 1,288 9,921
49 Albuquerque-Santa Fe, NM 568,650 338,140 229,045 22,763 x
50 Providence, RI-New Bedford, MA 565,230 236,544 4,780 217,000 x

Total Cable Subscribers - Top 50 Mkts 45,853,712 12,240,000 6,437,829 8,594,883 3,815,525 3,235,348 4,065,638 42 35
% of total basic subscribers 66.9% 90.3% 76.0% 67.2% 54.9% 51.9% 70.0% markets markets

Pro forma basic subscribers(1) 68,591,333 13,560,000 8,471,100 12,798,000 6,953,700 6,237,888 5,808,035
% of subs in DBS local markets 62.6% 87.3% 70.5% 67.4% 49.5% 40.8% 61.9%
(1) Pro forma for all announced acquisitions.
Source: Deutsche Bank Securities and company information.

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Exhibit 11
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
Comcast Executive Biographies

Name Position
Ralph J. Roberts Chair
Julian A. Brodsky Vice chair
Brian L. Roberts President
Stephen B. Burke President–Comcast Cable
John R. Alchin Executive vice president and treasurer
Lawrence S. Smith Executive vice president

Ralph J. Roberts–chair of Comcast Corporation. Roberts founded the company in 1963. During
the 1950s, Roberts served as president and CEO of Pioneer Industries, a leading men’s
accessories company. Earlier, he was vice president with Muzak Corporation and an account
executive with Aitken Kynett Advertising Agency. Roberts graduated from the Wharton School
of the University of Pennsylvania and served a four-year tour of duty in the U.S. Navy. Roberts
also participated in continuing education programs at Harvard Business School.

Julian A. Brodsky–vice chair of Comcast Corporation. Prior to his election to the post of vice
chair, Brodsky served as senior vice president and chief financial officer of the company.
Brodsky also served as chair of Comcast Interactive Capital Group, an in-house venture capital
fund. This fund sought and managed technology-related investments complimentary to
Comcast’s core activities. Brodsky is a certified public accountant and graduated from the
Wharton School of the University of Pennsylvania.

Brian L. Roberts–president of Comcast Corporation. Before becoming president in 1990,

Roberts held several senior management positions with Comcast. He held several leadership
positions in the cable television industry, including chair of the National Cable &
Telecommunications Association (NCTA) from 1995 to 1996, when the landmark deregulatory
1996 Telecommunications Act became law. He was chair of CableLabs, the cable industry’s
research and development arm, and serves on the NCTA’s board and executive committee.
Roberts also graduated from the Wharton School of the University of Pennsylvania.

Stephen B. Burke–president of Comcast Cable since June 1998. Burke’s work at Comcast has
won him numerous industry awards, including the 2001 Vanguard Award for Cable Operations
Management. Prior to joining Comcast, Burke served with the Walt Disney Company as
president of ABC Broadcasting. Burke joined the Walt Disney Company in January 1986, where
he helped develop and found the Disney Stores, one of Disney’s fastest growing businesses with
more than 680 stores in 11 countries. In 1992, Burke moved to Euro Disney S.A., where, as the

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Exhibit 11 (continued)

president and chief operating officer, he helped to lead a comprehensive restructuring effort.
Burke is a Phi Beta Kappa graduate of Colgate University in Hamilton, New York, and a
graduate of the Harvard Business School.

John R. Alchin–executive vice president and treasurer of Comcast Corporation. In that capacity,
Alchin managed the company’s capital formation activities, including equity and debt
placements in domestic and international markets. Alchin was also responsible for investor
relations and treasury cash management functions. Prior to joining Comcast in January 1990,
Alchin was a managing director of Toronto Dominion Bank. Alchin was active in founding the
bank’s U.S. Communications Finance Group in 1980, which rapidly became the largest lender to
the cable television industry. Alchin earned his BA and his MBA from the University of
Toronto.

Lawrence S. Smith–executive vice president of Comcast Corporation. Smith joined Comcast in

1988 with responsibility for finance and administration. Smith previously served as chief
financial officer of Advanta Corp., a financial services firm with assets of $1.28 billion, and was
a tax partner in the Philadelphia office of Arthur Andersen & Co., with which he was affiliated
for 18 years. In addition to being a tax partner at Arthur Andersen & Co., he was responsible for
the Philadelphia International Business practice and Merger & Acquisition practice. Smith is a
graduate of Ithaca College in New York.

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Exhibit 12
COMCAST CORPORATION’S MERGER WITH AT&T BROADBAND
AT&T Broadband Executive Biographies

Name Position
C. Michael Armstrong Chair and CEO of AT&T
William T. Schleyer Chief executive officer and president
Ron Cooper Chief operating officer
Michael P. Huseby Chief financial officer
David M. Fellows Chief technology officer

C. Michael Armstrong–chair and chief executive officer of AT&T since 1997. Armstrong was
formerly the chair and chief executive officer of Hughes Electronics. Armstrong served as a
director of Citigroup Inc., chair of U.S.—Japan Business Council and former chair of FCC
Network Reliability and Interoperability Council. He was a member of the President’s Export
Council, the Council on Foreign Relations, the National Security Telecommunications Advisory
Committee, the Defense Policy Advisory Committee on Trade, the Business Roundtable, and the
Business Council. Armstrong was the director of the National Cable Television Association
(NCTA) and a member of its Executive Committee. He was a trustee of John Hopkins
University, chair of the Board of Visitors of John Hopkins University School of Medicine, and a
member of the Advisory Board of the Yale School of Management.

William T. Schleyer–president and chief executive officer of AT&T Broadband since October
2001 following the retirement of Daniel E. Somers. Prior to joining AT&T Broadband, Schleyer
was a principal in Pilot House Ventures, LLC, a venture capital company that invests in the
broadband and Internet industries. Previously, he was president and chief operating officer of
MediaOne and, prior to its acquisition by the US West Media Group, president and COO of
Continental Cablevision. Schleyer earned his bachelor’s degree in mechanical engineering from
Drexel University and an MBA from Harvard Business School.

Ron Cooper–chief operating officer of AT&T Broadband since October 2001. Cooper has had a
20-year career in the cable and information services industries. Prior to joining AT&T
Broadband, Cooper was one of the founders, and was a director of Relera, which built and
operated 11 data centers across the country, providing information services to corporate
customers. Prior to that he was executive vice president of operations for MediaOne and he has
held leadership positions in marketing, product management, technology, programming, human
resources, and advertising sales at MediaOne and its predecessor company, Continental
Cablevision. Cooper graduated from Wesleyan University with a liberal arts degree.

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Exhibit 12 (continued)

Michael P. Huseby–executive vice president of finance and administration and chief financial
officer of AT&T Broadband since 1999. For 10 years prior to joining AT&T, Huseby was a
partner in the professional services firm of Andersen Worldwide, where he had global
responsibility for Andersen’s cable television practice, and more than 23 years of experience
serving clients in the communications and other industries. Huseby graduated from the
University of Colorado at Boulder with a degree in business administration.

David M. Fellows–chief technology officer of AT&T Broadband since October 2001. Prior to
joining AT&T Broadband, Fellows was chief technology officer of US West Media Group, and
senior vice president for engineering and technology for MediaOne and Continental Cablevision.
Before joining Continental, he was president of Scientific-Atlanta’s Transmission Systems
division and vice president of engineering and technology for GTE Lenkurt. Fellows holds two
patents and is head of CableLabs’ DOCSIS certification board. Fellows graduated from Harvard
College with an SB degree in engineering and applied physics. He also holds a master’s degree
from Northeastern University and completed the PMD program at Harvard Business School.

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