Comcast At&t Merger

1. Identify the positive considerations and key risk factors associated with the acquisition. How will the acquisition affect Comcast’s competitive position?

The most positive consideration that Comcast is gaining from a merger with AT&T is AT&T’s market share. The merge of No. 1 cable company, AT&T Broadband, with the No. 3 operator, Comcast Corporation, will create a new giant, AT&T Comcast, that would have $19 billion in annual revenue in 2002 and over 22 million subscribers.

1. Identify and discuss the impact of the acquisition on the key financial credit measures.
2. Will this acquisition improve or reduce Comcast’s credit quality? Does the new company merit an investment-grade rating? Provide supporting factors for your recommendation.
3. Based on your assessment of the direction of Comcast’s credit quality, should your firm hold or sell the bonds?
4. List the most important questions that you would pose to Comcast’s executive management team. Explain why these questions are important to your analysis. Suggest their potential answers and how those answers would affect your credit decision.

After several months bidding, Comcast finally win and value at $72 billion on this merger. Comcast has confidence in merging, because they believe that this merger will not only reduce their cost but also increase the market share. Needless to say, this merging would be beneficial for both AT&T and Comcast. Firstly, Comcast will still focus on its cable and broadband business and engage in innovation the cable and broadband services. By merging AT&T, Comcast will absorb the telephone services from AT&T, who is the leader in this industry. This acquisition would allow the new corporation, AT&T Comcast, to develop and provide a variety of correlated products, which would increase the economies of scope. Secondly, because the consumers’ demands for high-tech are increasing, the future of broadband technology is very impressive. Comcast has the potential to leading this industry if merging with AT&T. From the case analysis, AT&T Comcast will take over 22 million cable subscribers, which is about 30% of U.S. cable subscriber. Also the new company would become the largest cable operator. This would be a great opportunity for AT&T Comcast to lead the broadband industry. Thirdly, becoming the largest cable operator, AT&T Comcast will decrease the threat of programmers and decrease the threat from substitutes such like DIRECTV, which is satellite operator. The best way to determine whether the acquisition is successful is to measure both revenue and expense. As I mentioned the merging between Comcast and AT&T will have great success and the new company, AT&T Comcast would gain most profit from broadband industry. In addition, Comcast believes the new company would be able to decrease the cost of capital by reducing overhead cost and cost associated with telephony and hardware expenditure.