This case study describes the post-merger-integration strategies of Comcast Corporation's President Roberts and Comcast Cable President Burke.
L.J. Bourgeois; Nicholas Goodman; John O. Wynne Jr.
Harvard Business Review (UV0599-PDF-ENG)
December 09, 2004
Case questions answered:
- Why does Comcast Corporation want or need to merge with AT&T Broadband?
- Make an argument for Comcast NOT going forward with this merger? (Give some reasons why it may be better for Comcast “not” to merge with AT&T)
- If Comcast completes the merger how would you gauge the success of this merger? (What factors or measurements would you use to evaluate the success or failure of the merger?)
- Are there any technological challenges with this merger? If so, how would you manage them?
- How did the US government’s change in public policy affect the competitive nature of the cable industry? (Hint: Review the Telecom Act of 1996 for clues!)
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Case answers for Comcast Corporation's Merger with AT&T Broadband
1. Why does Comcast Corporation want or need to merge with AT&T Broadband?
In 1996, the government passed the legislation that wireless, wireline technologies could compete with traditional cable and satellite broadcast companies. This legislation threatened the existence of cable operators as the satellite broadcast companies began to provide better services. Also, cable companies were limited by the government to the size of coverage nationally while on the other hand satellite companies were free to compete with them nationally. Looking at this situation, Comcast considered an acquisition as a great opportunity to hold them in the market. Comcast Corporation wanted this merger for the following reasons:
- Comcast thought that a merger with AT&T would help them compete in an industry that was, at that time, facing higher fees and capital expenditure.
- The cable technology was slowly being discarded
- AT&T’s had very attractive, well-structured assets and had an attractive demographic appeal for advertisers.
- Comcast Corporation would expand extensively to become the nation’s largest cable operator
- It believed that it could double AT&T’s lackluster 20% EBITDA
- It would have a low capital cost, enabling them to develop new programming and add value-added services.
- Fear that new entrants might take over the market like Cox Communications
2. Make an argument for Comcast NOT going forward with this merger? (Give some reasons why it may be better for Comcast “not” to merge with AT&T)
Comcast Corporation had two choices:
Firstly, even after the government passed the legislation act, Comcast performed…