Comcast says it's `committed' to buying AT&T cable unit.(Knight Ridder Newspapers)

Comcast is trying to become the biggest cable company in the world.

But to accomplish that, Comcast Corp. will have to convince AT&T Corp. shareholders that they are offering a great deal for their cable system.

Comcast has offered AT&T $44.5 billion in Comcast stock and another $13.5 billion to assume its debt to buy its cable unit, which has 13.5 million subscribers nationwide.

Such a deal would give Comcast 22 million cable customers, making it nearly twice as big as the No. 2 cable operator AOL Time Warner. Comcast, which has 8.4 million subscribers, is the third-largest cable company in the nation, behind AT&T and AOL Time Warner.

AT&T on Monday said it had no plans to sell its cable operations, but Comcast President Brian Roberts said he was ``absolutely committed'' to reaching a deal.

Roberts Monday tried to rally support for the deal from AT&T shareholders, after months of talks with AT&T's board fell apart.

``It accelerates AT&T's own plan to separate the company,'' he said.

AT&T in October announced plans to split its communications empire into four separate companies. The first stage of breakup started Monday, when AT&T spun off the wireless unit. Other units would handle residential phone customers, business phone customers and the cable operations.

Under Comcast's bid for the cable unit, AT&T shareholders would receive Comcast shares valued at $12.60 each, based on Friday's closing price. AT&T shareholders would also keep ownership of the rest of AT&T's core business. Comcast also would take over $13.5 billion in AT&T debt.

Comcast also said it was prepared to buy AT&T's 25.5 percent stake in Time Warner and 30 percent in Cablevision. Comcast stock took a hit Monday as investors worried about the bid for AT&T, shares closing at $39.30, down $2.98. Meanwhile, AT&T investors welcomed news of Comcast's proposed takeover. AT&T stock closed at $18.70, up $1.98.

Here is the dilemma for AT&T shareholders and executives:

AT&T plans to break into four companies to boost the value of its shares, which have been falling since spring 2000 when it hovered near $60. Chief executive officer Michael Armstrong says the company is worth more than investors give it credit and will fetch more broken into four companies.

The Comcast bid would seem to confirm that strategy.

The total value of Comcast's bid for just the cable division is $58 billion, just $5 billion lower than the value of AT&T's four divisions' total stock value. If you multiply AT&T's 3.37 billion outstanding shares by the Monday closing price of $18.70, AT&T is valued at $63 billion.

But the bid is not being embraced by AT&T executives because they spent about $100 billion piecing together the cable empire through acquisitions that began nearly three years ago.

So from that perspective, Comcast is not offering a good deal.

``It's looks like a huge premium, but you have to see that AT&T paid a lot more for the assets than Comcast is, and since that time, AT&T has put even more into its assets,'' said media analyst Robin Diedrich of Edward Jones in St. Louis. ``Comcast would be buying better assets than AT&T bought initially.''

AT&T executives simply see the bid as the next attack in the long-running battle between Comcast and AT&T for cable subscribers.

In March 1999, the Roberts family, the majority owners of Comcast, announced an agreement to buy MediaOne Group Inc. AT&T trumped the offer with a higher cash-and-stock offer. Comcast got $1.5 billion in cash when it abandoned the bid and let AT&T buy MediaOne.

AT&T, the long-distance giant, grew to become the largest cable company by buying up cable systems nationwide as an avenue for providing local phone service.

Comcast agreed to drop its fight for MediaOne in exchange for an agreement to swap some cable properties in different parts of the country in an effort to create big regional clusters.

Though Roberts said he doesn't think regulators will try to block Comcast's attempt to become the dominant cable company in the country, some analysts say the move will be highly scrutinized.

Imran Khan, a senior analyst at Boston-based Yankee Group, said regulators will want to look at what this deal would do to the competitive landscape, because Comcast would operate nearly one-third of cable service nationwide. ``They wouldn't just let it come down to two companies serving the whole country,'' Khan said.

The Center for Digital Democracy, a nonprofit group in Washington, D.C., that advocates open Internet access, said it worries Comcast's plan to buy AT&T would hurt consumers and competitors because it would give Comcast too much power.

X X X

(c) 2001, Detroit Free Press.

Visit the Freep, the World Wide Web site of the Detroit Free Press, at http://www.freep.com.

Distributed by Knight Ridder/Tribune Information Services.