April 22, 1999
Mr. Charles M. Lillis, Chairman and Chief Executive Officer
MediaOne Group, Inc.
188 Inverness Drive West
Englewood, Colorado 80112
AT&T is pleased to offer to acquire all of MediaOne Group for cash and AT&T common stock. AT&T will pay $30.85 in cash, subject to upward adjustment, and 0.95 of a share of AT&T common stock, for each share of MediaOne common stock. Based on today's closing price, our cash and stock offer has a value of $87.375 per MediaOne share.
AT&T will support the value of this offer by increasing the amount of cash per share to offset up to a 10 percent decline in AT&T's stock price from yesterday's closing price of $57 per share. With this feature, we provide downside protection for the value of our proposal, while MediaOne shareholders will realize all the upside of any increases in AT&T's stock price.
The stock portion of our offer will be tax-free to MediaOne shareholders. If you wish, we would also be happy to discuss with you a structure that would give MediaOne shareholders the ability to elect between cash and AT&T shares, subject to the same aggregate proportion of cash and stock. Our offer represents a 17 percent, or $8.6 billion, premium to the value of MediaOne's previously proposed merger with Comcast based on the closing price of Comcast's shares today. This is a 44 percent premium to the trading price of the MediaOne shares prior to announcement of its merger agreement with Comcast and a 26 percent premium to today's MediaOne closing price. In addition, the future value of the AT&T shares we are offering, which are voting, cash dividend-paying shares, is far greater and more reliable than the non-voting, non-cash dividend-paying Comcast shares.
In developing this proposal, we have worked together with Amos B. Hostetter, the former chairman and chief executive officer of Continental Cablevision and former chief executive officer of US West Media Group. Upon consummation of the transaction, Mr. Hostetter would become the non-executive chairman of AT&T's Broadband & Internet Services business unit and would join the AT&T board of directors. We would also expect to invite one of MediaOne's current directors to join the AT&T board upon completion of the merger.
The combination of our two companies is truly a powerful opportunity for both companies and our shareholders, as well as for employees, and will provide significant benefits to the American public. The merger will accelerate our ability to bring a wide array of broadband services to consumer and business customers across the nation. The AT&T and MediaOne networks are complementary, and together they will be digital, high-speed, and nationwide. With the addition of the MediaOne local broadband systems, we will offer customers superior connections for not only traditional video services, but also new competitive voice and data services. In particular, this will enhance our ability to deliver competitive local telephone services to millions of Americans.
Beyond our network, AT&T offers MediaOne access to unparalleled technology and service capabilities to enhance its offers and increase its services to its communities. These technology and service attributes will provide MediaOne with long-term sustainable advantages. The combination will also allow us to join the management talents of our two companies. With our Broadband & Internet Services group headquartered in Denver, we will be able to combine readily and smoothly with MediaOne's Denver-based headquarters.
We are quite confident of our ability to complete this transaction as quickly, if not more quickly, than the proposed Comcast merger. We have received commitments from Chase Manhattan Bank and Goldman Sachs Credit Partners L.P. aggregating $10 billion towards a credit facility. As lead arrangers, they have also advised us that they are highly confident of their ability to raise financing for the balance of the cash portion of our offer. In addition, our legal advisors are confident of our ability to obtain all necessary approvals in a timely manner.
We believe that our merger is fully consistent with the policy underlying the ownership limits that were contained in the now-suspended FCC cable ownership rules and is strongly in the public interest. However, should any questions arise with respect to this issue, we are ready to take such actions as are necessary to ensure timely legal and regulatory approval of the merger.
Given the clear superiority of our offer to the proposed Comcast merger, we would like to meet with you and your advisors as soon as possible to finalize a definitive agreement between our companies. The offer is, of course, subject to entering into such an agreement. In this regard, we are ready to enter into a merger agreement comparable to the Comcast agreement. We are also ready to exchange confidential information immediately. We are committed to bringing an AT&T/MediaOne combination to a successful conclusion and would be delighted to discuss any aspect of our proposal. We look forward to meeting at the earliest opportunity to conclude this mutually beneficial transaction for both our companies. In addition, we and our advisors will be happy to meet with MediaOne at any time to answer any questions about our proposal.
C. Michael Armstrong