Comcast will merge with AT&T's broadband division in a deal worth about $52 billion.
The deal ends a bidding contest for the largest US cable television operator.
AT&T's selection of the Comcast bid came five months after it spurned a $41 billion unsolicited bid by the America's third-largest cable operator for the division as being too low.
Under the merger plan, AT&T will spin off its cable division and simultaneously merge it with Comcast, forming a new company called AT&T Comcast Corp. The deal also includes about $20 billion in AT&T debt.
The company's board met earlier this month to discuss bids for its broadband operations - including the possibility of spinning it off as a standalone business - but decided to have further talks with bidders before making a decision.
Other companies that submitted bids for Denver-based AT&T Broadband were AOL Time Warner and Cox Communications. Microsoft also considered increasing its stake in AT&T Broadband or participating in a bid by Comcast or Cox in return for a stake.
AT&T broadband has about 13.8 million cable subscribers, including over three million who use its digital video services, according to the National Cable Television Association.
PA