Comcast squeezed slumping AT&T to make ‘lemonade’

Comcast officials, alarmed at AT&T Broadband’s half-million subscriber loss early last year, took steps to staunch the flow months before the merger closed last Nov. 15, Comcast President and CEO Brian Roberts said last night during a keynote address to the Salomon Smith Barney 13th Annual Global Entertainment Media and Telecommunications Conference, in La Quinta, Calif.

“We were terribly disappointed that AT&T started losing customers at the rate they did,” Roberts said.

Comcast, in fact, was so disappointed that it jumped the gun and started taking action in July--with the consent of AT&T Broadband’s existing management--Roberts said.

“We had a crisis and [decided] that when we get in there on day one we are going to make radical changes,” Roberts said. “It accelerated everything we probably would have done over a much more gradual period. In our own way, we tried to make lemonade out of the situation.”

The solution included visiting all 16 AT&T markets and “in 14 or 15 cases put in our own general managers,” Roberts said. “We backed that up with 150 other executives in the markets who have all worked for the company and know what we are trying to accomplish.”

Comcast has also instituted a 100-day “action plan” in every market to address basic subscriber retention.

“Since the summer, every single person working at the company now knows job one is to deal with this issue,” Roberts said.

Once the deal closed in November, Comcast had a free hand to begin making AT&T a Comcast clone, including driving revenue margins from the 24% range into Comcast’s 42% area. The company almost immediately shut down AT&T Broadband’s Denver headquarters and laid off about 2000 workers, removing about $170 million in overhead.

“In most acquisitions, you would get to closing and you would start to do your budgets and start to put your people in place and start to work with the people you inherited,” Roberts said. “Because of the subscriber loss--making lemonade-- we decided to start all this integration work in July. So, whether they all agree or disagree on what we did, we made our decisions and then we executed on it.”

Not everything was slash and burn, Roberts emphasized.

“We’ll be adding jobs in some markets, building call centers, and reducing jobs in other areas. There will be thousands more relocations when it’s all complete, and we hope that will be very much in the first part of the year,” he said.

The end goal of the work started in July is to make AT&T Broadband just like Comcast and to return the merged company to free cash flow by the end of this year, Roberts emphasized.

“We can comfortably make the statement that by the end of this year, we’ll have free cash flow for the combined company,” Roberts said. “We’ll be back in that position inside the fourth quarter.”

At the same time, Comcast will work aggressively to bring AT&T’s old cable systems up to Comcast’s standards, while implementing new technologies like vide-on-demand within those systems, Roberts said.

In a way, the focus on AT&T is a deviation from Comcast’s normal course of selecting an annual focus--such as digital video, video-on-demand or high-speed data--and concentrating all efforts in that direction.

“It’s a matter of where you put your focus and your efforts,” Roberts said.