Brian Roberts' first instinct was to try to trump Rupert Murdoch. More than a year ago, Roberts, the president of Comcast, was eagerly watching Murdoch's News Corp maneuver for control of the DirecTV service. That would have given Murdoch the access he craved into American living rooms, creating the most formidable enemy yet for the cable industry.
But over a lunch at Lindy's deli across from Pennsylvania Station in Manhattan, another idea was planted in Roberts' head.
"Brian, your destiny is to acquire AT&T Broadband," Hank Vigil, a vice president at Microsoft, told him, according to a person at the lunch. "If that comes up, we'll help you."
Thursday, with Microsoft's help, Comcast did just that. The Philadelphia-based cable company won a fierce bidding war for control of AT&T's cable operations for US$47 billion in stock and the acquisition of US$20 billion in debt, creating the nation's largest cable operator in the year's largest deal.
The new AT&T Comcast will have 22 million subscribers; its largest rival in subscription television will be a pending combination of DirecTV not with the News Corp, but with another satellite operator, EchoStar. Should that deal survive regulatory scrutiny, it would create a company with 17 million subscribers.
The two companies will be the biggest, and presumably most powerful, pipelines into American homes of information, entertainment and media services.
Others thought they were destined for that role -- Murdoch, for one, before EchoStar edged him out in his pursuit of DirecTV, and AT&T's chairman, Michael Armstrong, for another, until Wall Street lost patience with his deal making. The losers for the AT&T cable systems, AOL Time Warner and Cox Communications, are likely, among others, to push for even more consolidation in the cable business.
But for now, Comcast -- led by Roberts and his father, Ralph Roberts, 81, the chairman and founder -- rules the roost. Their acquisition of AT&T Broadband marks the culmination of nearly four decades of growth that began in 1963, when the family bought a small cable operator in Tupelo, Mississippi, with 1,200 subscribers.
"We were able to build it up to a point where they would even talk to us," Ralph Roberts joked Thursday, pointing at Armstrong in the news conference at the New York Hilton where the deal was presented.
Just three months ago, Armstrong was giving the Robertses the silent treatment, after Comcast made an unsolicited US$44.5 billion bid for AT&T Broadband.
Earlier in the year, Brian Roberts and Armstrong had privately discussed a friendly merger. But those talks, which usually took place in discreet dining rooms at hotels in Philadelphia and Manhattan, broke down when AT&T's board rejected any deal in which Comcast would control more than 50 percent of the combined company.
Convinced he could force AT&T to reconsider, Roberts went public with Comcast's bid, belittling Armstrong and AT&T management as part of his strategy to create enough shareholder pressure to force a sale.
The unsolicited bid enraged Armstrong. But it did force AT&T -- whose plan was to spin off its cable units to shareholders -- to put the business up for sale.
For Brian Roberts, the problem was that he now had competition. Comcast, AOL Time Warner and Cox all made bids for AT&T. And even though Microsoft, an investor in Comcast since 1997, was in his corner, the software giant put itself in just about everyone else's corner, too. Microsoft had made side deals with Comcast, Cox and even AT&T in the event the company decided to stay independent -- all to block what the software company considers its more important rival in broadband services: AOL Time Warner.
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