Fitch Remains Negative

NEW YORK -- The long-term debt and commercial paper ratings of Comcast, Comcast Cable Communications (Comcast Cable), TCI Communications and MediaOne Group remain on Rating Watch Negative with the merger announcement between Comcast and AT&T Broadband in a transaction valued at $72 billion. The current senior unsecured debt ratings for Comcast, Comcast Cable, TCI Communications and MediaOne Group are 'BBB', 'BBB+', 'A-' and 'A-', respectively. In addition, AT&T's long-term rating of 'A-' remains on Rating Watch Negative. The stock based transaction includes the assumption of approximately $20 billion of debt and other liabilities from AT&T Corp by the new merged entity, AT&T Comcast. This transaction also includes the conversion of $5 billion of QUIPS, owned by Microsoft, into 115 million AT&T Comcast shares. In addition, the transaction includes AT&T's Time Warner Entertainment ownership stake, which is expected to be monetized before the closing of the merger. The merger is subject to regulatory approvals and is expected to be completed by year-end 2002. The merger will face FCC and Department of Justice (DoJ) scrutiny, but if approved, the combined company will pass 38 million homes and have approximately 22 million subscribers. AT&T Comcast will have, as of Sept. 30, 2001, approximately 4.8 million digital cable, 2.2 million cable modem and 924,000 cable telephony subscribers. The new company will continue to grow its widely offered digital cable and cable modem services, and will focus a material amount of its resources in expanding and penetrating cable telephony. AT&T Broadband offers cable telephony to approximately 6 million homes and has an average penetration rate of 15%. This offering is expected to be expanded by approximately 5-6 million homes per year and AT&T Broadband has indicated that its current service will be EBITDA breakeven in 1Q02. According to the company the potential of this service is to add $300 of EBITDA per subscriber annually in 2003. Likewise, the company has indicated that the capital cost is currently $700 per subscriber, but is expected to fall over the next few years. The merger is expected to generate material synergies from AT&T Broadband margin improvement, programming and corporate overhead cost reductions as well as scale revenue synergies associated with advertising and new product expansion including telephony. Therefore, the combined company will have strong EBITDA growth prospects. From a financial perspective, considering a year-end 2002 closing date, the combined EBITDA of AT&T Comcast could approximate $6-7 billion assuming some continued margin improvement at AT&T Broadband along with continued core EBITDA growth for both companies. From a debt perspective, the combined gross debt could approximate $24-26 billion at closing assuming the conversion of Microsoft's QUIPs to common stock, monetization of the TWE stake partially offset by funding needs at AT&T Broadband. Given this potential debt level, along with continued AT&T Broadband margin improvement and continued core EBITDA growth, AT&T Comcast should generate debt-to-EBITDA less than 4.5 times (x) at closing and strengthening thereafter, which would be representative of a 'BBB' rating for a cable company of this magnitude. Fitch will be meeting with management to determine a more detailed financial structure. Another important aspect that Fitch will monitor is regulatory proceedings and any adverse effect those might have on the proposed entity. Fitch Inc.