at&t and comcast merging

7/30/2019 AT&T and Comcast Merging

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Hamid Moghani Public Policy Assignment Comcast AT&T NEU Number: 001161852

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1. Why does Comcast want or need to acquire/merge with AT&T Broadband?3. How would you argue the success of this merger? (What factors or measurements would

you evaluate to declare the merger a success?)

At the time, all the others companies, such as satellite operators were continuing to lure away the

customers. They were somehow successful because they were not limited by the government while

cable companies such as Comcast or AT&T were limited by the government to the size of national

coverage and the franchises they were awarded.

Programmers such as Disney, Viacom, and news Corp. were using their power to charge cable

companies such as AT&T and Comcast higher fees for the programming they carry. Increasing the

rate was not a good thing for the cable providers. They would lose subscribers and they would lose

market share as well. To resist that, cable companies needed comparable reach and scale.

Comcast believed that AT&T Broadband section would give it the necessary scale to compete in

an industry that was facing increased programming fees. AT&Ts infrastructure was highly modern

and attractive. They were well designed and clustered, contiguous to existing Comcast systems and

possessed attractive demographic appeal for advertisers.

The AT&T Comcast expected to achieve significant cost saving. Comcast believed that nearly $2

billion of annual operating synergies could be extracted from the renegotiating of programming

contracts, reduced overhead, and a reduction in costs associated with telephony and hardware

procurement capital expenditures. The new company would have a lower cost of capital which

would enable it to develop new programming, buy under-distributed 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 programmer became more powerful. The

additional scale that the acquisition provided would also allow for management, marketing budgets

and the deployment of the new services among a larger customer base.


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2. Make an argument for Comcast NOT going forward with this acquisition? (Give somereasons why it may be better for Comcast not to merge with AT&T)

The AT&Ts financial position was not ideal. By 2000, long distanc e price war, slow adoption of new

technologies, multiple acquisitions and a dry up of the capital markets left AT&T and other industry

leaders in danger. The company had not upgraded its systems given a capital crunch that was

affecting all telecommunication companies. On October 2000, Armstrong announced the complex

plan to analysts called Project Grand Slam that would break AT&T four pieces into separate stocks.

The announcement caused AT&T stock to sink further, falling from $ 26.87 to $ 23.37 on the day of

announcement.

AT&T and Comcast had pursued two different cable strategies, one aimed at offering additional

value-added services and one focuses solely on cable, and this would no doubt prove troublesome

for any merged companies.

4. Are there any technology challenges with this merger? If so, how would you manage

them?

Yes, as I mentioned above AT&T and Comcast had pursued two different cable strategies, one aimed

at offering additional value-added services and one focuses solely on cable, and this would not a

good thing for a merger.

In my mind its a long time merger. It cant happen overnight. All the devices on both companies

should be compatible or we should design the plan and the network in a way that not being

compatible would not be a problem. And along the way we could change our technologies, I mean

both companies devices, to the newest technology. Because if we change one sides devices to be

compatible and attachable to other sides devices it would take a very long time and after that we

may want to change the whole companys devices.

Its Also a matter of new customer base that is not familiar with the new companys services. For

example Comcast customers are only familiar with its cable and TV services and AT&T customers are

familiar with its value-added and telephony services. How should we offer both services in one

package with a price that the subscriber would get along with it?


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5. How did the US governments change in public policy affect the competitive nature of the

cable industry?

Telecommunication Act of 1996 allowed access of telephone line to cable companies. This was so huge. I

can imagine how competitive the industry became. The potential increase in customer, more value-

added services and other detail things pushed the cable companies to decrease their prices to recruit

new customers. Now all the companies can offer telephone lines, cable line, TV shows and internet on

one carrier that almost all the houses and apartments have. For example, AT&T was interested in using

cable lines to offer a range of phone services to local phone customers.

They should have lower prices on every service they had. It went to the point that the long distance call

became free. It was and is continuously aiming the cable companies and pushes them to have more

scalable service and prices.

at&t and comcast merging

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