, which once made extravagant promises about how much money it could save at AT&T Broadband, is racing to make good on them.
Following last week's closing of its acquisition of AT&T Broadband, Comcast has taken several steps, beyond the usual and inevitable layoffs, to cut operating expenses at
former cable TV business.
That means filing two lawsuits in an attempt to cut better deals with vendors already under contract, and -- according to one source -- negotiating a way out of a deal with a third.
Comcast's moves, some of which dovetail with cost-cutting measures already under way at the premerger AT&T Broadband, spotlight the magnitude of the task Comcast faces in completing a turnaround at the former AT&T systems, which have suffered above-average subscriber losses and below-average operating cash-flow margins. To get its stock moving in the right direction again -- Comcast shares have lost a third of their value over the last year amid a bloodletting in the cable sector -- Comcast will need to show investors it can hit its targets sooner rather than later.
Comcast dropped 17 cents Monday to $25.83.
In Comcast's favor, the Philadelphia-based cable operator has proven adept in the past at integrating acquisitions so they adhere to the pennywise, cash-flow-maximizing Comcast Way. But this time around, Comcast will have to digest what was the largest cable TV operator in the nation.
In addition, the lawsuits illustrate how, nearly four years after AT&T bought Tele-Communications Inc., the cable colossus that became the foundation of AT&T Broadband, owners of the former TCI still are trying to extricate themselves from deals completed during the administration of former TCI chairman John Malone, now chairman of cable programmer
The bar that Comcast has set for itself is high. Last year, when the operator's bid for AT&T Broadband was still hostile, Comcast vowed it could cut AT&T Broadband's corporate overhead costs from $500 million to $50 million annually. A few weeks before the eventually friendly merger was completed, Comcast said it had targeted 1,700 jobs for elimination at the AT&T Broadband corporate level, mostly in Denver. The first 675 of the employees targeted for layoffs could be let go as early as mid-December; the balance are expected to cut by the end of next summer.
In the latest example of what Comcast is trying to undo, the operator filed a suit in U.S. District Court for the Eastern District of Pennsylvania, against
, a supplier of customer service and billing systems for cable operators and other telecommunications providers. Comcast's amended complaint was dated last Wednesday, two days after the Comcast-AT&T merger closed.
Among other goals of the lawsuit, Comcast seeks to get a declaration that a contract under which CSG provides services to AT&T Broadband can be dropped in favor of a pre-existing contract between Comcast and CSG. The CSG contract now covering the AT&T systems -- due to expire in 2012 -- was signed in 1997 as part of a deal in which CSG bought software technology from TCI.
Comcast's lawsuit picks up on a legal wrangle between AT&T and CSG that began in March of this year, when AT&T said it would consider trying to terminate its contract with CSG by August. Arbitration proceedings began between the two companies in May, according to CSG's latest quarterly filing with the
; the company gave no details on the status of any arbitration or settlement discussions.
In the meantime, AT&T Broadband made significant cutbacks in its business with CSG. After spending about $212 million with CSG in the first 9 months of 2001, AT&T Broadband cut that figure to about $128 million in the first 9 months of 2002.
filed a lawsuit last week against a subsidiary of Liberty Media, saying that the AT&T systems shouldn't be bound by a programming agreement signed in 1997 between Liberty and TCI, then Liberty's parent company. In this case, as well, AT&T Broadband had already launched similar legal proceedings against the vendor.
A cable industry veteran unaffiliated with Comcast or AT&T said that such lawsuits aren't automatically filed when a cable operator is unhappy about a contract inherited in a cable system acquisition. But, says the executive, such lawsuits aren't out of the question, either. Typically, deals the buyer perceives as burdensome are negotiating points between buyer and seller as they set a price for a purchase, says the source. However, a buyer may decide that apparent problems can be solved through litigation. "There's no standard approach," says the executive.
In yet another possible area for dispute, Comcast is seeking to alter the terms of yet another agreement that TCI made with a vendor, according to a person who spoke on condition of anonymity. In this case, says the source, Comcast is in dispute with
over payments related to the security system for Headend in the Sky, an AT&T Broadband subsidiary that delivers expanded channel lineups to numerous small cable TV systems.
Those payments, says the source, arise from a deal reached in 1998 under which TCI sold the security business to General Instrument, subsequently acquired by Motorola. A Comcast spokesman declined to comment on the story; a Motorola spokeswoman didn't respond to messages requesting comment.
Whatever the details, the flurry of activity corresponds to comments made by Comcast President Brian Roberts before the AT&T Broadband-Comcast merger was closed. In an October conference call with analysts, Roberts said that when he had talked to executives at other companies who had contended with large-scale integrations, each executive had the same answer when asked what he would have done differently: "I would have moved faster."