'We fit like a glove,' Philly cabler's topper sez

Comcast chief Brian Roberts said Monday the Philly cabler won’t sock customers with a big rate increase if it gets AT&T’s cable systems, and at least some analysts were predicting that such an acquisition could pass regulatory scrutiny.

But it remained unclear how AT&T shareholders will view the $58 billion offer — $44.5 billion in stock and the assumption of $13.5 billion in debt — and the telecom giant reiterated its intent to wrap cable assets into a tracking stock rather than selling them. It’s also believed other AT&T rivals are mulling their own possible bids for the telecom’s cable operations.

If Comcast’s bid for AT&T does succeed, the deal would move quickly to Washington for regulatory scrutiny. The Federal Communications Commission would need to give its blessing, as would antitrust officials at the Dept. of Justice or the Federal Trade Commission.

Tipping the cap

It virtually goes without saying that pols on Capitol Hill would convene hearings on any such takeover, even if they couldn’t necessarily block the deal. But it also should be noted that only a few months ago, Comcast’s proposal wouldn’t have been possible at all due to a long-standing FCC ownership rule prohibiting one cabler from reaching more than 30% of the national audience.

Much to the chagrin of the FCC, a federal appeals court in Washington struck down the cap, saying the 30% cutoff was arbitrary and even unconstitutional. But the court left the door open for the FCC to review the gutted ownership rule to see if a higher cap should be set, and the agency is likely to launch such a review this summer.

Wall Streeters seemed to believe an AT&T/Comcast agreement could happen, as investors traded AT&T stock higher on the prospect of the sweet deal and sent Comcast shares tumbling — a common side effect for the acquiring company in a pricey transaction. AT&T shares closed up 9% at $38.95; Comcast fell 7% to $38.95.

Some observers noted, however, that even if Comcast goes directly to AT&T shareholders with terms of its offer — a move expected later this month — the cabler can do little but influence the outcome of an eventual vote on the AT&T cable tracking stock proposal. An attractive Comcast offer for the cable assets could cause AT&T shareholders to nix the tracking stock idea, and telecom management could be forced to embrace the Comcast proposal by default.

Yet to set a date

It’s notable, though, that AT&T has yet to set a date for a tracking-stock vote, so the company would wait several months until enough dust has settled on the Comcast proposal as to render the matter moot. To date, the company has said only that it expects to conduct such a vote sometime in late summer or early fall.

Consumer advocates were quick to decry Comcast’s proposal.

“Comcast wants to become an unregulated digital toll booth, and it will use its dominant monopoly status to extract new fees from competitors and consumers alike,” Center for Digital Democracy exec director Jeff Chester said.

Earlier this year, Chester and reps of other consumer groups roundly criticized the AOL Time Warner merger and put intense pressure on the FCC and FTC to extract certain concessions from the media/entertainment conglom.

Still, Comcast execs expressed confidence that its proposal can pass regulatory scrutiny — assuming it passes muster with AT&T shareholders. If it does, Roberts further predicted that Comcast could keep its debt ratings from falling into junk bond status, despite estimates that such a deal would as much as double Comcast’s current $15.2 billion debt load.

The Comcast boss seemed to signal to press and analysts the cabler’s readiness to boost terms of the its offer for the AT&T assets if necessary.

“We want to make this happen,” he said. But Roberts added that he believes Comcast can successfully digest such a pricey acquisition.

‘Fit like a glove’

“Because we fit like a glove, we’re able to give a very significant premium to their shareholders,” he said.

AT&T and Comcast execs held talks as recently as six to eight weeks ago about the telecom’s potential sale of its cable assets to Comcast, but the discussions broke down over “a number of issues,” Roberts said.

AT&T on Monday denied press speculation that those talks had reached consensus on financial terms but broke down over issues of management control. The telecom giant added that it intends to proceed with a previously announced plan to restructure into a number of separate businesses and noted an AT&T Wireless spinoff was completed Monday.

Comcast’s Roberts declined to say if he’s contacted Liberty Media boss John Malone about backing the cabler’s bid for the AT&T cable assets. Liberty Media, a cable-programming unit, is slated to be spun off by AT&T in August, but Malone will continue to be a major shareholder in AT&T.

Comcast, a 38-year-old company that went public in 1972, would become the nation’s biggest cable-systems operator by acquiring AT&T’s cable operations, almost doubling the size of its nearest rival. Such a deal would give Comcast — which now serves 8.5 million cable subscribers including some other pending transactions — a total of 22.3 million subs, compared with 12.8 million for AOL Time Warner.

An AOL Time Warner spokeswoman declined to say if the company is considering its own move on the AT&T systems. But if he was worried about such competish, Roberts wasn’t showing it.

“I wouldn’t bet against us,” the Comcast topper breezed.

(Dow Jones contributed to this report.)

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