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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of
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AT&T Corp.
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(Name of Registrant as Specified In Its Charter)
Comcast Corporation
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0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
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The following presentation was used by Comcast at its analyst meeting:
Comcast and AT&T Broadband:
Creating the New Broadband Leader
July 9, 2001
Safe Harbor
Caution Concerning Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. In some cases, you can
identify those so-called "forward-looking statements" by words such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue," or the negative of those words and other
comparable words. Comcast Corporation ("Comcast") wishes to take advantage of
the "safe harbor" provided for by the Private Securities Litigation Reform Act
of 1995 and you are cautioned that actual events or results may differ
materially from the expectations expressed in such forward-looking statements as
a result of various factors, including risks and uncertainties, many of which
are beyond the control of Comcast. Factors that could cause actual results to
differ materially include, but are not limited to: (1) the businesses of Comcast
and AT&T Broadband may not be integrated successfully or such integration may be
more difficult, time-consuming or costly than expected; (2) expected combination
benefits from the transaction may not be fully realized or realized within the
expected time frame; (3) revenues following the transaction may be lower than
expected; (4) operating costs, customer loss and business disruption, including,
without limitation, difficulties in maintaining relationships with employees,
customers, clients or suppliers, may be greater than expected following the
transaction; (5) the regulatory approvals required for the transaction may not
be obtained on the proposed terms or on the anticipated schedule; (6) the
effects of legislative and regulatory changes; (7) the potential for increased
competition; (8) technological changes; (9) the need to generate substantial
growth in the subscriber base by successfully launching, marketing and providing
services in identified markets; (10) pricing pressures which could affect demand
for Comcast's services; (11) Comcast's ability to expand its distribution; (12)
changes in labor, programming, equipment and capital costs; (13) Comcast's
continued ability to create or acquire programming and products that customers
will find attractive; (14) future acquisitions, strategic partnerships and
divestitures; (15) general business and economic conditions; and (16) other
risks described from time to time in Comcast's periodic reports filed with the
Securities and Exchange Commission.
2
Brian L. Roberts
President, Comcast Corporation
Terms of the Proposed Transaction
o Merger between Comcast and AT&T Broadband
o Values AT&T Broadband at $58 billion, including assumed debt of $13.5
billion
o Prepared to acquire AT&T's interests in TWE, Cablevision and Rainbow
Media by assuming more debt and issuing more equity to reflect their
values
o AT&T shareholders will own a majority of the economic and voting interests
in NewCo
o Comcast will issue 1.0525 billion shares
o Tax free to AT&T and all AT&T shareholders
4
AT&T Shareholders:
A Better Alternative... Now!
o Delivers a premium value for AT&T's broadband assets
o $12.60 of value per AT&T share; which represents 75% of AT&T's
per share market price(1)
o Provides additional upside from significant cost savings and synergy
opportunities
o Eliminates risks, costs and uncertainties inherent in creating a
broadband tracking stock
o Consistent with goals of AT&T's existing restructuring plan
(1) AT&T's per share market price based on AT&T when-issued closing price of
$16.80 as of 7/06/01
5
Creating the New Broadband Leader
Benefits to Comcast and AT&T shareholders:
o The largest broadband company
o Powerful platform for growth
o Opportunity to launch new products and build new programming assets
o Significant ongoing cost savings and synergies
o Industry leading management team with proven integration success
o Financially strong with solid investment grade balance sheet
o Creates one of the world's leading media, content and distribution
platforms
6
The Largest Broadband Company
Twice the revenues of the next
largest competitor
[Cluster Chart detailing 2001E Cable Revenue* by corporation:
NewCo 14.9 ($Bn)
Time Warner Cable 7.0 ($Bn)
DirectTV 5.7 ($Bn)
Charter 4.1 ($Bn)
Cox 3.9 ($Bn)
EchoStar 3.9 ($Bn)
Adelphia 3.2 ($Bn)
Cablevision 2.1 ($Bn)]
* Statistics include video, residential telephony and high speed data
businesses. Source: Wall Street estimates
7
The Largest Broadband Company
Nearly twice as many subscribers
as the next largest competitor
[Cluster Chart detailing 2001E Subscribers* by corporation:
NewCo 21.9 (MM)
Time Warner Cable 11.3 (MM)
DirectTV 10.6 (MM)
Charter 7.0 (MM)
Cox 7.0 (MM)
EchoStar 6.3 (MM)
Adelphia 5.9 (MM)
Cablevision 3.0 (MM)]
*Source: Wall Street estimates
8
Powerful National Presence
o Present in 41 states
o 85% of subscribers in top 50 DMAs
[Chart of the continental United States indicating national presence of NewCo.]
Source: Company data and 2001 Cable TV Fact Book
9
Powerful Major Market Presence
Top 20 DMAs NewCo Subs in 000's
-------------------------------------------------
1. New York, NY 670
2. Los Angeles, CA 530
o Leader in 8 of top 3. Chicago, IL 1,750
10 DMAs 4. Philadelphia, PA 1,790
5. San Francisco-Oakland-San Jose, CA 1,830
o 70% of NewCo 6. Boston, MA 1,680
subscribers in top 7. Dallas-Fort Worth, TX 560
20 DMAs 8. Washington, DC 860
9. Detroit, MI 830
o Greater than 45% 10. Atlanta, GA 680
market share in 14 11. Houston, TX --
of the top 20 DMAs 12. Seattle-Tacoma, WA 960
13. Tampa/St. Petersburg-Sarasota, FL 210
14. Minneapolis-St. Paul, MN 340
15. Cleveland, OH 90
16. Miami/Ft Lauderdale, FL 780
17. Phoenix, AZ --
18. Denver, CO 620
19. Sacramento-Stockton-Modesto, CA 550
20. Pittsburgh, PA 620
Source: Wall Street estimates, Cable Fact Book, Company figures
10
Powerful Platform for Growth
Benefits of scale and scope:
o Develop new programming content
o Deploy new products and services, including next generation telephony
o Establishes national advertising platform
o New Internet opportunities
o Growth and value creation from operating efficiencies
11
Stephen B. Burke
President
Comcast Cable Communications
Opportunity for Value Creation
Substantial EBITDA margin improvement opportunity
[Overlap Chart representing Comcast Broadband and AT&T Broadband*
EBITDA Margins by quarter:
1Q00 2Q00 3Q00 4Q00 1Q01
---- ---- ---- ---- ----
Comcast Broadband 42% 44% 45% 43% 41%
AT&T Broadband 22% 24% 23% 20% 18%]
Note: margins include corporate overhead allocation.
* AT&T Broadband margins exclude restructuring and other charges
Source: Company Reports
13
Cost Savings and
Synergy Opportunities
Potential margin improvement
Comcast margin(1) 41%
AT&T Broadband margin(1) 18%
-------
Difference 23%
AT&T 2001LQA Broadband revenues(2) x $10Bn
-------
Potential margin improvement $2.3Bn
(1) Margin figures are based on 1Q01 publicly available information and include
corporate overhead allocation.
(2) Annualized 1Q01 AT&T Broadband revenues
14
Cost Savings and
Synergy Opportunities
Sources of margin improvement
o Core cable operating efficiencies
o Productivity improvements
o Corporate overhead reduction
o Improved telephone economics
15
Cost Savings and
Synergy Opportunities
Value from economies of scale and scope
o Programming savings
o Hardware procurement
o Other savings
Targeted annual expense reduction: $300 - $500MM
Targeted annual capex reduction: $200 - $500MM
16
Cost Savings and
Synergy Opportunities
o Potential annual cost reductions and synergies: $2.6 to $2.8 billion
o Targeted as near term and highly achievable: $1.25 billion
[Graphic Omitted]
Economies of Scale and Scope*: $300-$500 Million
Margin Improvement: $2.3 Billion
*Excludes revenue enhancement and capex reduction
17
Pro Forma Cash Flow
Cash flow enhanced by cost savings
and synergy opportunities
[Cluster chart detailing 2001E EBITDA* by corporation:
AT&T Broadband $2.2 ($Bn)
Comcast $2.8 ($Bn)
NewCo $6.3 ($Bn) (including $1.3 Bn
in cost savings
& synergies)]
*Source: Wall Street estimates
18
Financial Powerhouse
NewCo to have investment grade profile
Leverage Credit Profile
($ in Billions) Debt/01 EBITDA
- ----------------------- ------------------------------
Comcast $11.2 Without synergies 4.7x
Assumed debt 13.5 $1.25Bn of synergies 3.8x
----- Target Rating Investment Grade
Pro forma debt $24.7
2002 leverage ratios would decline significantly
(1) Comcast debt based on 3/31/01 reported debt adjusted to exclude ZONES
and to include impact of subsequent events.
(2) EBITDA multiples based on EBITDA forecasts from Wall Street estimates.
19
Accretive to Comcast Shareholders
Transaction is EBITDA accretive to Comcast shareholders
($ millions) Year 1 Year 2 Year 3
- -------------------------------------------------------------------------------
EBITDA accretion (4%) to (1%) 2.5% to 5% 6% to 9%
(dilution)/share(1),(2)
Synergy assumption $400 - $600 $700 - $900 $1,000 - $1,250
Proposal represents 15x-16x 2002 estimated EBITDA
after taking into account Year 1 synergies
(1) EBITDA forecasts based on Wall Street consensus estimates
(2) Assumes $58Bn transaction pro forma for full year 2002 and the assumption of
$13.5Bn of debt
20
Comcast: Proven Integration Success
o Comcast has grown revenues 13x since 1990, through integration of 11
significant acquisitions
o Nearly doubled cable subscribers from 4.5MM to 8.4MM through five major
transactions in 24 months
o Rapidly and significantly improved acquired systems
21
Comcast's Integration Success
Dramatic Improvement in 12-24 months
Jones
EW Scripps Intercable Lenfest
1997 1999 Growth 1999 2000 Growth 1999 2000 Growth
- -------------------------------------------------------------------------------------------------
Revenue (MM) $ 309 $ 407 +32% $ 537 $ 582 +8% $ 515 $ 568 +10%
OCF (MM) $ 134 $ 207 +54% $ 198 $ 249 +25% $ 199 $ 267 +34%
Margin 43% 51% +8 pts 37% 43% +6 pts 39% 47% +8 pts
OCF/Subscriber $ 168 $ 236 +40% $ 181 $ 221 +22% $ 152 $ 200 +32%
22
Comcast's Integration Success
Rapid improvement in operating performance
of systems recently acquired from AT&T
AT&T Broadband(1)
Growth 2000 2001E
--------------------------------------------------------------
Revenue (MM) $ 426 $ 461 + 8%
OCF (MM) $ 113 $ 149 +32%
OCF Margin 26% 32% +6 pts
OCF/Subscriber $ 148 $ 193 +30%
(1) Based on 765,000 subscribers acquired in swaps as of 12/31/00
23
Comcast's Superior
Operating Track Record
Strong EBITDA margins maintained even
as lower margin systems are integrated
[Chart showing that Comcast has maintained EBITDA
margins in excess of 40% while its cable EBITDA
has grown from $810 million in 1996 to $1.9 billion
in 2000]
24
Building Value Through Content
o Merger allows NewCo to capitalize on Comcast's fastest growing
business segment
o New channels have fast track to profitability
o Platform of 22 million subscribers
o Track record of significant growth in distribution, revenues and
operating cash flow
[QVC Logo] Tripled OCF in six years ($209MM in 1994 to $619MM in 2000)
[E! Logo] 40% subscriber growth in three years (46MM to 65MM)
[The Golf Channel Logo] Grew revenues from $0 to $100MM in five years
[Comcast SportsNet Logo] Regional sports network covers nearly 50% of Comcast subscribers
25
Building Value Through Investments
Value Current
at initial trading or
Investment investment realized value
- ------------------------------------------------------------
Sprint PCS $ 680MM $ 2.7Bn
TCG - AT&T $ 150MM $ 2.2Bn
Excite@Home $ 10MM $ 1.7Bn
Other $ 100MM $ 0.5Bn
------- ---------
Total $ 940MM $ 7.1Bn
26
Comcast: Shareholder Value Creation
[Chart showing that 1000 shares of Comcast purchased
in 1972 IPO for $7 per share would have a value
of $3.9 million as of July 6, 2000 representing a
compound annual growth rate of 24% (compared to 12%
for the S&P 500).]
27
Comcast: Outperforming the Market
[Chart showing that since 1998 Comcast's stock price
has appreciated nearly 168% compared to an approximately
23% increase for the S&P 500 and a 46% decline in AT&T's
stock price]
28
Comcast: Outperforming the Market
Comcast has outperformed cable industry peers, Nasdaq and S&P 500 for every
period over past 10 years
1 Year 3 Years 5 Years 7 Years 10 Years
Comcast 7% 26% 37% 26% 25%
Cable Composite(1) 0% 17% 35% 24% 20%
Nasdaq (49%) 2% 12% 16% 16%
S&P 500 (18%) 1% 13% 15% 12%
(1) Consists of Cox, Cablevision, Adelphia and Charter
Source: FactSet
29
Creating the New Broadband Leader
What we would create:
o Leader in eight of the top 10 markets
o Presence in 18 of the top 20 markets
o 22 million basic subscribers
o Expanded platform to launch new products and build new programming assets
What Comcast delivers:
o Superior operating track record
o Proven integration success
o Significant synergy opportunities
o Industry leading returns to shareholders
o 24% CAGR since IPO
30
Creating the New Broadband Leader
o One of the world's leading media companies
o Premier national distribution network
o Positioned to expand relationship with customers
o Compelling content opportunities
o Industry leading management team
o Financial strength and flexibility
o Expanded margins and multiples
31
Comcast and AT&T Broadband:
Creating the New Broadband Leader
July 9, 2001
Note: The following notice is included to meet certain legal requirements:
Subject to future developments, Comcast may file with the Commission
(i) a preliminary proxy statement for solicitation of proxies from the
shareholders of AT&T Corp. ("AT&T") in connection with AT&T's special meeting
which is scheduled to take place in September 2001 and (ii) a registration
statement to register the Comcast shares to be issued in the proposed
transaction. Investors and security holders are urged to read the proxy
statement and registration statement (when and if available) and any other
relevant documents filed with the Commission, as well as any amendments or
supplements to those documents, because they will contain important
information. Investors and security holders may obtain a free copy of the proxy
statement and the registration statement (when and if available) and other
relevant documents at the Commission's Internet web site at www.sec.gov. The
proxy statement and registration statement (when and if available) and such
other documents may also be obtained free of charge from Comcast by directing
such request to: Comcast Corporation, 1500 Market Street, Philadelphia,
Pennsylvania 19102-2148, Attention: General Counsel.
Comcast, its directors and certain other Comcast employees and
advisors may be deemed to be "participants" in Comcast's solicitation of
proxies from AT&T's shareholders. A detailed list of the names, affiliations
and interests of the participants in the solicitation is contained in a filing
made by Comcast with the Commission pursuant to Rule 14a-12 on July 9, 2001.