AT&T TO ACQUIRE BELLSOUTH FOR $67BILLION

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AT&T TO ACQUIRE BELLSOUTH FOR $67BILLION

 user 2006-03-06 at 9:57:00 am Views: 58
  • #14709

    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
    .