Shareholders OK Comcast, AT&T deal

Vote in Philadelphia is overwhelming

protest afterward is tame

`A huge milestone'

Companies would create No. 1 cable TV provider

July 11, 2002|By Andrew Ratner | Andrew Ratner,SUN STAFF

PHILADELPHIA -- The shareholders meeting yesterday to vote on the merger of Comcast Corp. and AT&T Corp.'s broadband unit into the largest cable-television provider in the country had all the drama of QVC, the home-shopping channel owned by Comcast.

The Comcast vote was 99.8 percent in favor of the merger, largely because 86 percent of the voting shares belong to the Roberts family, which founded the Philadelphia-based company.

A demonstration after the vote by groups decrying the monopolization of cable and the Internet was tame, with the media and plainclothes police outnumbering protesters. And only one shareholder expressed concern about a roughly $50 billion deal during a meeting that lasted all of 15 minutes.

AT&T shareholders, in a concurrent vote at their meeting yesterday in Charleston, S.C., also approved the sale of their broadband company to Comcast. About 95 percent of AT&T shareholders who voted yesterday -- more than two-thirds of all of its shareholders -- approved the deal, said spokeswoman Eileen Connolly.

"Today's a huge milestone," Comcast President Brian L. Roberts told about 100 people gathered in a ballroom. The audience was split almost evenly between employees and shareholders.

Company executives, braced for a bigger reaction, moved the annual meeting from Comcast's headquarters to a downtown hotel for the first time.

Roberts acknowledged the angry turn in the business climate since the December announcement of the deal with AT&T.

Major telecommunications carriers Adelphia Communications Corp. and WorldCom Inc. have collapsed in recent months, and those widely reported events along with accounting scandals have wounded the stock market.

Comcast's bow-tied founder, Ralph J. Roberts, said after the meeting that the deal probably wouldn't have been made if it hadn't been initiated before the recent events.

The lone shareholder to raise a question, 63-year-old Philadelphia Web-page designer David C. Thomsen, took issue with Comcast's "corporate governance" in the new climate.

Thomsen pointed out that the reason yesterday's vote lacked suspense was that Brian Roberts controls a class of 9 million shares that carry 15 votes apiece, compared with one vote per share for other investors.

Roberts said he thinks his family has made a significant compromise to create the new entity after early objections were raised about the level of control they first sought.

The Roberts family will control about 33 percent of the new company, compared with the 86 percent of Comcast it now owns.

"In 40 years, we've never been at less than 51 percent," Brian Roberts said of his family's stake. "We struck a compromise and a balance."

He expressed confidence that the proposed merger will succeed where other recent combinations in the sector have failed. The AOL-Time Warner marriage was "all about AOL," and AT&T had a "phone agenda" with its cable acquisitions, he said. "Comcast is a cable company."

AT&T Comcast would have roughly 22 million customers, 10 million more than the next-largest cable company, Time Warner.

That broader scale would help the company sell national advertising and develop new technologies, such as video on demand and telephone service over cable lines or the Internet, Roberts said.

The Justice Department and Federal Communications Commission have begun reviewing the combination and must be satisfied that it won't violate antitrust laws.

The ownership change is subject to approval by local governments under their cable franchise agreements with Comcast or AT&T. Comcast reported yesterday that it has received approvals from 90 percent of the localities it serves, including Baltimore and its suburbs, while AT&T reported about 70 percent approvals.

Comcast paved the way for yesterday's vote by arranging $17 billion in financing and by making plans to sell or restructure about $13 billion in debt, including its investments in AT&T, Sprint Corp. and Time Warner Entertainment, Brian Roberts said.

He said he isn't daunted by a slowing of cable adoption in TV households or by the overall sluggish market for high-speed Internet subscription. Cable modems have become the most popular mode of broadband connections, he pointed out.

"We are two to three years ahead of where we need to be on broadband at this point," he said. "The real challenge is to sell new products," such as premium services that allow people to order movies or shows from cable archives direct to their TVs.

Indeed, since its inception in the 1960s, Comcast has had much success in staying one step ahead of the couch potato.

Roberts told the audience that the company-owned Golf Channel creates as much passion as any outlet on cable. It recently began a 24-hour channel for video gamers called G4, "MTV for video games," Roberts called it.

QVC Inc., 57 percent of which Comcast owns, has become a $4 billion-a-year video cash register, outselling such venerable retailers as Bloomingdale's and L.L. Bean.

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