News

Comcast, Allen Complete Joint Venture Deal

6/06/2003 8:28 AM Eastern

Negotiations between Comcast Corp. and Charter Communications Inc.
chairman Paul Allen to exchange put rights the Philadelphia-based MSO owns in a
joint venture with Allen came to a close on Friday, with Comcast accepting a
$728 million cash payment from Allen for the rights.

Comcast will use the proceeds to pay down its bank debt.

"We completed the transaction consistent with the original put agreement,"
Comcast spokesman Tim Fitzpatrick said. He declined further comment.

Charter also declined to comment.

Michael Nank, a spokesman for Vulcan Inc., Allen's personal investment
vehicle, could not be reached for comment.

News of the deal came as a surprise, especially since most analysts and
observers had expected the parties to work out a three-way deal with Charter
that would involve Charter transferring systems in New England and Texas with
Comcast in exchange for the money.

Investors were also hoping that the three-way
deal would come to fruition, especially since Charter said last Monday that negotiations
regarding the put were extended through June. That news drove Charter
stock up 9 percent (28 cents per share) between last Monday and last Thursday.

After news that Comcast had accepted cash instead of systems broke Friday
afternoon, Charter stock fell nearly 6 percent (19 cents per share) to $3.19
each in 2:09 p.m. trading.

The three-way deal would have been a way for Allen to pump needed cash into
Charter's coffers to help pare down some of its $18 billion debt.

According to sources familiar with the situation, talks between Charter and
Comcast broke down over the two parties' respective valuations of the
systems.

Sources familiar with the situation said that Comcast was eyeing two Charter
systems in particular - Worcester, Mass. and Fort Worth, Texas.

Both are near larger Comcast clusters in Boston and Dallas.

"It all came down to valuation - I think my systems are worth more than you
do," said one source familiar with the situation.

Charter has said
in the past that it wished to unload non-strategic systems, but has said
that it wanted at least $3,000 per subscriber.

Last month, Charter sold its Port Orchard. Wash. system - with about 25,500
subscribers - to WaveDivision Holdings LLC for about $3,600 per customer.

Comcast had appeared to be in support of the three-way deal mainly because it
would be a more tax-efficient way to exercise the put.

At Comcast's analyst day meeting on May 16, executive vice president of
finance and co-chief financial officer Lawrence Smith said that the three
parties were trying to work out a deal.

"Our objective is to try to get some properties from Charter; get the money
from Paul and get some properties," Smith said at the analyst day meeting.
"We're working through it."

But Smith also gave the chances of reaching an agreement with Charter and
Allen at 50-50.

In retrospect, those odds should have given investors some indication that
negotiations weren't going as smoothly as originally thought.

"The reality was they got to a point where the options weren't viable," said
a source in the financial community who asked not to be named. "So Comcast went
ahead and triggered the put."

Comcast received the put rights from AT&T Broadband, which, in turn, got
them when Bresnan Communications sold out to Charter in 2000.

September