July 21, 2006 12:35 PM PDT
BellSouth shareholders approve AT&T merger
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The merger, announced in March, would create a telecommunications giant that dwarfs its nearest competitor, Verizon Communications.
About 97 percent of those voting Friday approved the merger, which represented more than 67 percent of the company's outstanding shares. Under the terms of the agreement, BellSouth shareholders will receive 1.325 AT&T shares for each BellSouth share.
AT&T became the largest phone company in the United States after local phone company SBC Communications acquired long-distance carrier AT&T last year for $16 billion. The company changed its name after the acquisition was completed.
In addition to merging the companies' traditional telephony and broadband businesses, AT&T will also take full control of Cingular Wireless, a joint venture owned by AT&T and BellSouth.
Consumer groups, which opposed the $16 billion merger between SBC and AT&T last year, have also expressed concern over this merger, arguing that the telecommunications market is consolidating too much, leaving fewer choices for consumers.
The American Civil Liberties Union has raised an eyebrow as well, because of several lawsuits that have been filed against AT&T for allegedly handing customer records and information over to the National Security Agency without a warrant or customer consent.
BellSouth has publicly distanced itself from the government's surveillance program. But the ACLU says it believes that lawsuits over AT&T's involvement in the government's program could put BellSouth shareholders at great financial risk. By some estimates, the combined company could be liable for more than $70 billion in damages, according to the ACLU.
On Thursday, a federal court in California allowed a lawsuit against AT&T to proceed despite a motion by AT&T and the government to dismiss the case based on a "state secrets" privilege.
"The companies have been dismissing the litigation brought against AT&T as insignificant, assuming it will be dismissed," Barry Steinhardt, director of the ACLU's Technology and Liberty Project, said during a telephone press conference. "And clearly it is not. And we expect other courts to move forward too. There is real risk here for BellSouth stockholders, who will eventually become AT&T stockholders."
The ACLU, which owns 400 shares in BellSouth, attended the shareholder meeting in Atlanta where Steinhardt asked BellSouth's CEO, Duane Ackerman, why the pending legal action was not disclosed in the shareholder proxy. He said Ackerman dismissed his question and eventually deferred to the company's legal counsel, who said the lawsuits had been disclosed in an AT&T filing with the Securities and Exchange Commission.
"I thought the response was very telling," he said. "Under securities law it's their (BellSouth's) obligation to discuss material risks with shareholders. It should have been disclosed in the proxy. And it shouldn't be so cavalierly dismissed as it was today."
Steinhardt said at least one lawsuit has already been filed in Georgia against BellSouth on behalf of its shareholders for neglecting to include the lawsuits as material risk factors in the shareholder proxy.
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