News

FCC OKs Comcast-SBC Cellular Deal

7/11/1999 8:00 PM Eastern

The Federal Communications Commission approved the sale of
Comcast Corp.'s cellular-telephone unit to SBC Communications Inc. for $400 million in
cash and $1.3 billion in assumed debt.

Comcast announced the sale in January. The company decided
to divest its cellular unit -- which held wireless-communications licenses in four states
covering an area with more than 8.4 million people -- in order to focus more on its core
cable operations.

However, the deal attracted additional FCC scrutiny because
some of Comcast's cellular properties overlapped with some cellular markets of Ameritech
Corp., another acquisition target of SBC.

In its order approving the sale, the FCC stated that the
Comcast Cellular/SBC merger would serve the public interest in that it is "unlikely
to result in the erosion of competition in any relevant market."

San Antonio-based SBC operates cellular systems in several
large markets across the country, including the Chicago, Boston, and Baltimore/Washington,
D.C., metropolitan areas, as well as upstate New York.

The company also operates cellular properties in Texas,
Missouri, Oklahoma, Kansas, Arkansas, California, Nevada, Rhode Island and portions of
Massachusetts.

In its approval, the FCC said it would consider the overlap
later as part of its ongoing review of the SBC-Ameritech merger. Ameritech had said
earlier this year that it would divest the overlapping cellular properties in a separate
deal with GTE Corp.

Bond-rating company Standard & Poor's Corp. upgraded
Comcast's debt rating in part because of the wireless-asset sale and the company's
decision to exit the bidding for MediaOne Group Inc., which is in the process of being
acquired by AT&T Corp. in a deal valued at about $62 billion.

In return for dropping out of the bidding, Comcast received
the option to purchase up to 2 million cable subscribers from AT&T in the future, and
it will also receive most-favored-nation status in a telephony deal with the company.

"Disposition of cellular and a larger presence in
cable television, which still maintains a superior, well-protected market position,
improves Comcast's overall business-risk profile," according to S&P.

Comcast Cellular had about 800,000 customers, but it was
strongest in the Philadelphia market, the company's home base.

The company appeared reluctant to expand the business
through acquisition, especially after major telecommunications players like AT&T began
buying wireless properties across the country.

Comcast offered wireless service under the "Comcast
Metrophone" brand in Pennsylvania, and it operates as "Comcast Cellular
One" in Delaware and New Jersey.

SBC is also buying Comcast's wireless systems in
Aurora-Elgin and Joliet, Ill., and 12 personal-communications-system licenses in
Pennsylvania that Comcast bought in 1997. SBC had already been operating the Illinois
properties under a management contract.

The deal helps to fill a gap in SBC's Cellular One
operations along the East Coast.

Want to read more stories like this?
Get our Free Newsletter Here!
March