January 31, 2005 11:48 AM PST

SBC to acquire AT&T for $16 billion

(continued from previous page)

brand will be used. AT&T's brand is well-established, especially among large corporate customers, whereas SBC has been a regional telecommunications carrier, with its main presence in the western and southwestern states.

"We value the heritage and strength of the AT&T brand, which is one of the most widely recognized and respected names throughout the world, and it will certainly be a part of the new company's future," Whitacre said.

Ma Bell's rise and fall
AT&T's fortunes have waxed and waned over more than 100 years, as the company became one of America's best-known brands and created some of the Net's basic technologies. Its late-1990s transformations helped lead to its downfall.

• 1877: Bell Telephone Company formed.

• 1885: American Telephone and Telegraph completes first line. Capacity: one call.

• 1946: Begins offering rudimentary mobile telephone service.

• 1958: Introduces first commercial modem.

• 1971: Bell Labs researchers create Unix operating system.

• 1984: Ma Bell splits into AT&T and "Baby Bell" local phone companies, including SBC.

• 1991: Buys NCR, a computer maker.

• 1993: Buys McCaw Cellular Communications, which becomes AT&T Wireless.

• 1996: Sells NCR and Lucent Technologies, its products division.

• 1998: Buys Tele-Communications Inc for $48 billion.

• 1999: Buys Media One cable network for $54 billion. Microsoft invests $5 billion in AT&T.

• 2000: March: Assumes control of Excite@Home. October: Announces will spin off wireless and cable divisions as separate companies.

• 2001: October: Agrees to buy Excite@Home for $307 million; deal later collapses. December: AT&T Broadband and Comcast merge, forming biggest U.S. cable company.

• 2002: Excite@Home closes.

• 2004: Cingular buys AT&T Wireless, forming biggest U.S. wireless company.

• 2005: SBC buys AT&T for $16 billion.

In addition, SBC will inherit AT&T Labs, which globally has more than 5,800 issued and pending patents.

SBC, meanwhile, has a strong presence in the local market with 52 million phone lines and 5.1 million DSL lines. That presence in the local consumer market contrasts with AT&T's decision in July to forgo pursuing new local customers and focus instead on corporate accounts.

Ma's home...but will the kids start squabbling?
Monday's deal will also bring full circle what was once AT&T's wireless service. Four years ago, Ma Bell spun off its wireless operations in a $10 billion IPO as part of a major restructuring, forming the independent AT&T Wireless. But last year, AT&T Wireless was sold to Cingular Wireless, a joint venture in which SBC holds a 60 percent ownership stake. The other 40 percent of Cingular is owned by BellSouth. Cingular has a temporary license to use the AT&T Wireless brand while it transitions the service off of the AT&T-based name and logo.

Some analysts, however, expressed concern that the Cingular joint venture could be strained as a result of the AT&T deal.

"It's inevitable that this merger will create friction between SBC and BellSouth," said Viktor Shvets, an analyst with Deutsch Bank North America. He said the deal makes SBC a larger competitor to BellSouth. Also, a merger between SBC and BellSouth--long a prediction of industry watchers--could face stiffer antitrust hurdles with the addition of AT&T's assets.

Whitacre dismissed concerns about the BellSouth partnership.

"We have a great relationship with BellSouth. I don't anticipate there will be any problems for Cingular, and this will actually help them pick up more business customers," Whitacre said.

The deal takes place as AT&T is abandoning the residential phone business, which it invented 130 years ago. Since the break-up, AT&T has relied on Federal Communications Commission rules that guaranteed it access to the network it once owned and that also regulated the terms and prices local phone monopolies could demand from rivals seeking to rent parts of their networks. When those rules phased out in late 2003, many analysts predicted an uneven playing field among companies seeking to offer phone and broadband service.

AT&T had meant to rally, making 2004 the "Year of the Giant" with its CallVantage phone service. The Internet telephony plan was intended to help Ma Bell, remain in the residential phone market, and maybe even thrive there. But the number of CallVantage subscribers may be less than 100,000, according to a source, which puts in doubt whether AT&T will meet its goal of attracting a million subscribers by year's end.

Consolidation: Is it the new black?
The merger is also expected to stir up further consolidation in the market, Shvets said. MCI, AT&T's top competitor, could be the next acquisition target. Analysts say it makes sense for any of SBC's fellow Baby Bells--Verizon, Qwest Communications, or BellSouth--to acquire MCI.

Like AT&T, MCI has an extensive nationwide and international IP network. The company, which emerged from bankruptcy last spring, has also been targeting business customers. But also like AT&T, MCI has been struggling to offset declining revenue from its long-distance business.

"When one company gets bigger like this, everyone else starts looking around for opportunities," Shvets said. "It's like a mudslide. Once it starts, you can't stop it. You just have to grab the twigs on the way down."

The process of closing the deal may take longer than most mergers, due the regulatory climate that governs telecom companies. SBC will need approval for the deal from 26 to 28 states, the U.S. Department of Justice and the Federal Communications Commission.

Under the deal, AT&T shareholders will receive 0.77942 shares of SBC common stock for every share of AT&T, which translates into $18.41 a share. AT&T investors will also receive $1.30 a share in a special dividend. The deal is expected to close in the first half of next year.

News.com writers Maggie Reardon and Ben Charny contributed to this report.

Previous page
Page 1 | 2

2 comments

Join the conversation!
Add your comment
No Real Innovation Here
Neither AT&T nor SBC has come up with innovative products. Instead, they put their money into buying up competitors and sending armies of lobbyists to Washington. As a combined company, I would expect even less innovation. Perhaps this is because poor old Bell Labs was broken up during divesture, and then further broken up when Lucent was spun off.

The reason that AT&T is keen on VoIP is that is provided a way to avoid paying access fees to the local exchange carriers. Ironically, AT&T no longer has to worry about this, at least for the largest RBOC (SBC). It simply pays the fees to itself.

Real innovation at ATT/SBC would require a visionary CEO with a technical background, someone like Steve Jobs.

For add'l background on access fees, call routing, and gaming the system:
<a class="jive-link-external" href="http://www.usatoday.com/money/industries/telecom/2003-08-26-mci-cover_x.htm" target="_newWindow">http://www.usatoday.com/money/industries/telecom/2003-08-26-mci-cover_x.htm</a>


Keith
www.techcando.com
Posted by Stating (869 comments )
Reply Link Flag
No Real Innovation Here
Neither AT&#38;T nor SBC has come up with innovative products. Instead, they put their money into buying up competitors and sending armies of lobbyists to Washington. As a combined company, I would expect even less innovation. Perhaps this is because poor old Bell Labs was broken up during divesture, and then further broken up when Lucent was spun off.

The reason that AT&#38;T is keen on VoIP is that is provided a way to avoid paying access fees to the local exchange carriers. Ironically, AT&#38;T no longer has to worry about this, at least for the largest RBOC (SBC). It simply pays the fees to itself.

Real innovation at ATT/SBC would require a visionary CEO with a technical background, someone like Steve Jobs.

For add'l background on access fees, call routing, and gaming the system:
<a class="jive-link-external" href="http://www.usatoday.com/money/industries/telecom/2003-08-26-mci-cover_x.htm" target="_newWindow">http://www.usatoday.com/money/industries/telecom/2003-08-26-mci-cover_x.htm</a>


Keith
www.techcando.com
Posted by Stating (869 comments )
Reply Link Flag
 

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot

Discussions

Shared

RSS Feeds

Add headlines from CNET News to your homepage or feedreader.