Comcast May See Telephony This Year

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Comcast Corp. president Brian Roberts appeared to pine
slightly last week for his company's aborted attempt to land MediaOne Group Inc.

But Roberts, speaking to analysts on a conference call
regarding Comcast's first-quarter results, quickly pointed out that the settlement
agreement Comcast was able to wrest from AT&T Corp. -- the eventual winner of MediaOne
-- was a great consolation prize.

"I would be less than candid for us to say that we
didn't want to buy MediaOne. We would have liked to somehow have prevailed,"
Roberts said in the conference call. "I think this really is a marvelous resolution
that [furthers] our primary objective, which is to keep growing, and [that provides] the
bonus of an outstanding telephony deal."

Comcast reached a settlement with AT&T two weeks ago
that will give it an additional 2 million subscribers and most-favored status in a future
telephony deal with AT&T, in exchange for dropping out of the running for MediaOne.

Roberts added that the telephony deal would hinge on
Comcast's ability to upgrade its systems to handle voice traffic. He said Comcast
could begin offering telephone service in some markets this year.

"What we're focused on is to activate 100 percent
of the systems we take to 750 megahertz," Roberts added.

From there, Comcast would have to get telephony service
ready according to AT&T standards, which haven't been determined yet. However,
Roberts added, he believes AT&T will push hard to get telephony deployed in other
cable markets, and Comcast could even begin offering some telephony before the end of the
year.

"I don't think we just witnessed the battle for
MediaOne if it wasn't AT&T's intention to step on the pedal here," he
said.

And although AT&T may have won that battle, Comcast
isn't exactly licking its wounds. The Philadelphia-based MSO walked away with some
nifty reparations, including $1.5 billion in cash and the right to purchase 2 million
subscribers.

But it was the telephony agreement that Roberts
characterized as the best part of the deal.

"[Telephony] is a very valuable part of the exchange
that was made," Roberts said. "We are going to get the best terms of any
affiliate, not just the first two they sign up. If in five years, somebody else comes in,
we're then able to choose to modify our deal and take advantage of the best
economics, the best definition they choose to give to any affiliate."

He added, "We've got a very valuable piece of
real estate for our shareholders if you wanted AT&T as your telephone brand."

Roberts made no bones about what he believes is the
potential for telephony services for his company, characterizing it as the "single
greatest new revenue [stream] to this company someday."

And although the loss of MediaOne doesn't mean Comcast
won't look for another acquisition target if the right opportunity comes along,
Roberts said the AT&T deal lessens the need to find a new candidate right away.

"I think having gotten the MFN [most-favored-nation
status] on phone takes a lot of the pressure off from growing for absolute purposes,"
Roberts said. "I think clustering is as important as absolute size. And by having
gotten 3.7 million subscribers now in one supercluster [stretching from northern New
Jersey to Washington, D.C.], I think we've accomplished a lot."

The AT&T deal aside, Comcast also accomplished a lot
during the first quarter ended March 31, with operating cash flow increasing by 22 percent
to $425.1 million, and revenue rising 9.5 percent to $1.37 billion.

Fueling those increases were gains at its QVC Inc.
subsidiary, as well as growth in digital-cable subscribers.

Digital subscribers rose by 78,000 to 160,000, and the
company added about 20,000 subscribers to its Comcast@Home high-speed Internet service,
finishing the quarter with some 72,000 customers.

The cable segment saw revenue rise 11.7 percent to $604.8
million, and operating cash flow was $280.5 million, a 12.5 percent increase. Revenue at
its QVC segment was $649.6 million, a 19.3 percent increase. Operating cash flow at the
unit was $130.9 million, an increase of 37.6 percent.

Subscribers rose by 20,000, or 1.3 percent, during the
period, to 4.6 million. The company's results do not include those of Jones
Intercable Inc., which Comcast purchased in April.

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