New York -- Comcast Corp. officials Monday spelled out how they figure to
wring as much as $2.8 billion more in cash flow per year from AT&T Broadband
systems they want to buy.
For starters, Comcast could whack AT&T Broadband's estimated $500 million
in corporate overhead down to below $50 million, Comcast Cable Communications
Inc. president Steve Burke told analysts during a conference call.
AT&T Broadband's local-phone operation also loses about $500 million per
year, Burke said, and Comcast figures that it could make phone sales break even
in one to two years. Comcast inherited 150,000 MediaOne Group Inc. phone
customers after acquisitions and it brought that operation to breakeven, he
On the revenue side, Comcast has been able to sell customers in systems
acquired from AT&T Broadband an average of $7 per month more in programming
services, such as Home Box Office and Showtime, Burke said.
Where Comcast systems generate about 41 cents in operating cash for every $1
of revenue, the AT&T Broadband cash-flow margin is more like 18 percent,
Comcast officials said.
Comcast president Brian Roberts said a conservative goal is to split the
difference between those two margin levels within three years, which would add
$1.25 billion to the bottom line each year.
But if Comcast can elevate the systems' operating margin up to Comcast's 41
percent level, the result would be around $2.8 billion per year in increased
cash flow. That includes as much as $500 million in programming-cost savings
Comcast would claim for having AT&T Broadband's 13.5 million
Six months after acquiring 765,000 subscribers in former AT&T Broadband
systems, Comcast had added six points to those systems' overall operating
margins and boosted operating cash flow by 32 percent, Burke said.
Roberts would not speculate on what further action Comcast might take if
AT&T Corp.'s board rejects the offer. He said he hoped AT&T's board
would find the offer more attractive than the current plan to spin off the cable
unit as a separate company, with the risks inherent to initial public
'We really believe this proposal is superior to the proposed [AT&T]
restructuring in every respect,' Roberts said during a second call with
Roberts also said Comcast's shareholders would control 49 percent of the
combined companies, and the Roberts family -- which has 86 percent voting
control of Comcast -- would have voting control in the 'mid 40s or high 40s' of
the combined company.
'That works for us,' Roberts said. 'That's a huge step that we think,
however, will allow us to still retain the feel and the culture that is
AT&T's board of directors could find that to be an overly high level of
control, given the relative size of 8.4 million-subscriber Comcast and 13.5
million-subscriber AT&T Broadband, analysts noted.
Roberts wouldn't answer a question about whether he had sounded out key
AT&T shareholders John Malone and Amos Hostetter about if they would support
Comcast's unsolicited bid. 'I think we'll leave that for them. Too much
speculation can come out of that,' he added.