Shares in AT&T jumped 11 per cent yesterday as investors welcomed a $41 billion proposal from Comcast, the cable operator, to merge with the telecommunications giant's broadband cable operations.
AT&T issued a lukewarm response to Comcast's proposal, saying it had "no current plans" to sell its broadband business. However the company's board will consider the plan, which was made public on Sunday after eight months of on-off negotiations between the two companies broke down.
Comcast's decision to publicise its proposal casts a shadow over AT&T's plan to break up the company into four parts.
The performance of AT&T's cable business has been weighed down by an ambitious and expensive broadband strategy that involves trying to sell Internet access and telephone services to television customers. Comcast, renowned for running cable TV networks at low cost, hinted that it would scale back this plan. Comcast's approach won early support from some investors and analysts although the company's shares slipped on concerns over the amount of stock it would issue in a deal.
In early afternoon trading, Comcast shares were down $3.31 at $38.97, valuing its entire proposal, including the assumption of $13.5 billion of debt, at $54.5bn. AT&T shares were up $1.94 at $18.66.
Mr Brian Roberts, Comcast's president, argued the company could raise the profit margins of AT&T's broadband business. Industry observers welcomed the prospect of consolidation in the sector, arguing that it would speed the introduction of digital services. "Broadband does not really exist in any meaningful way in the US today," said Mr Richard Callahan, chairman of Callahan Associates, the cable investment group.
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