AT&T TO ACQUIRE BELLSOUTH FOR $67BILLION

[Anonymous]

AT&T to Acquire BellSouth for $67 Billion
ATLANTA
(March 06) – AT&T Inc. is buying BellSouth Corp. for $67 billion in
stock in a bid that further consolidates the telecommunications
industry and would give AT&T total control of their growing joint
venture, Cingular wireless llc.
The proposed purchase, announced
Sunday, also goes a long way toward resurrecting the old Ma Bell
telephone system, which was broken apart in 1984.
The deal appears to be the largest U.S. telecom merger ever.
In
1999, MCI WorldCom Inc. agreed to buy Sprint Corp. for an even larger
sum, $115 billion, but that deal was blocked by federal regulators.
Internationally, Britain’s Vodafone Airtouch PLC paid $180 billion in
stock for Mannesmann AG of Germany in 2000.
The sale, which is
subject to regulatory and shareholder approvals, would give San
Antonio-based AT&T total control over Atlanta-based BellSouth’s
nine-state network and its share of Cingular. AT&T currently owns a
60 percent share of the nation’s No. 1 cell phone provider, while
BellSouth has 40 percent.
The deal would substantially expand the
reach of AT&T, already the country’s largest telecommunications
company by the number of customers served.
Together, the three
companies employ more than 316,000 people, though that head count may
fall as AT&T eliminates redundant operations.
After spending
millions of dollars to rebrand AT&T Wireless Services Inc. stores
as Cingular stores and hundreds of millions of dollars more on
marketing the new Cingular after its $41 billion acquisition of
AT&T Wireless in October 2004, Cingular will now become AT&T if
the merger with BellSouth is completed.
The BellSouth name also would be absorbed in the deal.
“It’s going to be confusing,” said industry analyst Jeff Kagan. “This is the reinvention of the telecommunications industry.”
AT&T
will pay 1.325 of its own shares for each BellSouth share. Based of
Friday’s closing price of $27.99 for AT&T shares, that works out to
be $37.09 for each BellSouth share, an 18 percent premium from the
Friday closing price of $31.46 for the company.
AT&T Inc. was
formed by SBC’s acquisition of AT&T Corp. in November. The deal
added a substantial national reach to the former Southwestern Bell’s
local business, which is concentrated in 13 states, including Texas,
California, and the Midwest.
BellSouth is the dominant local telephone provider in the Southeast.
The
shift in the U.S. telecom landscape – moving from four to three
regional Bell operators – is sure to garner close review from
Washington.
“Twenty years after the government broke up Ma Bell,
this deal represents a mother and child reunion,” said Rep. Ed Markey,
the ranking Democrat on the House Subcommittee on Telecommunications
and the Internet.
“Our nation’s telecommunications markets must be
vigorously competitive and open to innovation in order to promote job
creation and economic growth,” Markey said. “This merger proposal is
one that unquestionably merits the utmost scrutiny by government
antitrust officials.”
Cingular spokesman Mark Siegel dismissed the
notion there would be public perception issues with the switch back to
the AT&T name for the wireless company.
“We built a business,”
Siegel said. “Is the brand an important part of that business? Yes. But
it is a business that is made primarily up of people. None of that
changes.”
Siegel said sole ownership by AT&T “gives us clarity of decision-making, and that is a good thing.”
With
cable companies increasingly vying for traditional phone companies’
share of local telephone service, such mergers in the industry have
been commonplace of late. Kagan, the industry analyst, said more could
be on the horizon.
“We’re not over it yet,” Kagan said.
The merged company would have 70 million local-line phone customers and nearly 10 million broadband subscribers.
The
combined company will be based in San Antonio, and Ed Whitacre,
AT&T’s chairman and chief executive, will keep those positions. His
counterpart at BellSouth, Duane Ackerman, 63, will run BellSouth’s
operations in a “transition period” after the merger.
Cingular’s headquarters will stay in Atlanta, as will the Southeast regional headquarters for the merged company.
Cingular
has grown strongly since it was formed in 2001 by the merger of a
number of regional wireless carriers, and there has been speculation
that AT&T wanted to assume full control of this growth business, in
part to be able to market it under the AT&T name.
The wireless operations will be the growth engine of the new company, and will account for one third of the combined revenue.
AT&T
expects the acquisition to save it $2 billion annually, starting the
year after the deal closes. About half of the savings would come from
reduced advertising expenses and from combining their work forces.
The
rest of the savings would come from combining the backbone network and
information-technology operations of the two companies.

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March 6, 2006 at 9:57 AM