SBC to buy AT&T?!?!?

[Aessotariq]

SBC in talks to buy AT&T?

Deal to create No. 1 telecom could be worth $15B, people familiar say; talks 'sensitive.'

January 27, 2005: 12:38 PM EST

WASHINGTON (Reuters) - SBC Communications Inc. is in talks to acquire AT&T Corp. for more than $15 billion to bolster its business among large corporations, people familiar with the talks said Thursday.

SBC, the nation's No. 2 telecommunications company behind Verizon, is interested in AT&T's lucrative corporate clients and international network, these people said.

Spokesmen for SBC and AT&T declined to comment.

AT&T, the biggest long-distance carrier, had a stock market value of about $14.7 billion based on Wednesday's closing stock price. The company has been suffering from growing competition from SBC, Verizon and other dominant local carriers.

AT&T (up $1.17 to $19.62, Research) shares jumped 5.6 percent in morning trading on the New York Stock Exchange, while SBC (down $0.50 to $24.08, Research) shares sank 2.3 percent. Shares of rival phone companies Verizon (Research) and Sprint (Research) also fell.

The merger talks, first reported in The New York Times and The Wall Street Journal, were described as sensitive with a potential for collapse.

One source said the SBC board was to hold a regularly scheduled meeting in the next few days and would probably discuss the matter.

For SBC Chairman Ed Whitacre, a voracious acquirer during his tenure at the company, buying AT&T would complete a transformation of SBC from a regional telephone company into an international force in wireless and wireline communications.

A combination of AT&T and SBC would create the nation's biggest telephone company and also reunite a "Baby Bell" with its former parent -- a union former Federal Communications Commission chief Reed Hundt deemed "unthinkable" in 1997.

Consumer advocates echoed those sentiments on Thursday.

"For SBC to gobble up its original parent company would finally put much of local and long-distance competition in the grave," said Gene Kimmelman, senior director of public policy for Consumers Union.

AT&T held unsuccessful merger talks with BellSouth Corp. (up $0.11 to $26.68, Research) in 2003, but the Baby Bell walked away after seeing AT&T's revenue and growth potential shrinking, almost daily. Finding the right value and price tag for AT&T was like "trying to weigh a falling rock," one analyst said at the time.

Heated competition

The merger talks with SBC come after a rough year for AT&T, which included 14,000 job cuts, a $11.4 billion write-down in its assets, and an 11.6 percent drop in full-year revenue. AT&T Chairman David Dorman told analysts last week to expect a 15 to 18 percent drop in revenue and more job cuts this year.

AT&T and other long-distance companies such as MCI Inc. have been battered as the Baby Bells have begun competing head-to-head in their markets. Cell phone service is another big competitor.

After winning approval from federal regulators to enter the long-distance market, SBC began moving aggressively into selling services to large businesses about a year ago, successfully targeting clients in the 13 states where SBC operates.

Despite AT&T's troubles. the company still has a firm grip on the market for telecommunications services to large corporations. Such customers rarely switch providers, and the Bells would have to spend billions to match the international networks that AT&T has built over decades.

AT&T CFO Tom Horton told Reuters in an interview last week that the U.S. long-distance telephone market was ripe for consolidation, with too many small companies pursuing too little revenue. He said consolidation was inevitable and could end a spiral of ever-lower prices for corporate voice and data services.

Banc of America analyst David Barden said in a research note that AT&T would likely be amenable to a sale, but that investors may question why SBC would try to move now instead of waiting for competition to whittle AT&T further.

He said SBC might believe the gap in market valuation between itself and AT&T "is as wide as it is likely to get in light of rising local competition and the perception that (long distance) competition is moderating."

Link to article

[Aessotariq]

It's official... this is too surreal.

SBC to buy AT&T for $16 Billion

After days of talks the boards of SBC and AT&T are to vote on a 16B tentative deal reached Sunday.

January 30, 2005: 7:10 PM EST

NEW YORK (Reuters) - The boards of directors of SBC Communications Inc. and AT&T Corp. were to meet Sunday to vote on a more than $15 billion stock deal in which SBC will buy AT&T, according to sources familiar with the situation.

The telecommunications companies, which have been in talks for days, have come to a tentative agreement, a source familiar with the situation said. The combination would bolster SBC's business with large corporations and spell the end for AT&T, the once ubiquitous "Ma Bell."

If the boards approve the deal, it could be announced as early as Monday, the source said.

Spokesmen for SBC and for AT&T declined to comment.

The $16 billion deal would include $15 billion in SBC shares as well as an additional $1 billion special dividend to be paid to AT&T shareholders, according to another source familiar with the deal.

Combined, the companies would be about the same size as Verizon Communications Inc., the nation's biggest telecommunications company. A merger would likely face antitrust hurdles.

For SBC Chairman Ed Whitacre, a voracious purchaser of companies during his 15-year tenure at the helm of company, buying AT&T would complete a transformation of SBC from a regional local telephone company into an international force.

A combination of AT&T and SBC also would reunite a "Baby Bell" with its former parent -- a union former Federal Communications Commission chief Reed Hundt deemed "unthinkable" in 1997.

"With this move, SBC would be elevated above the other Baby Bells with national business services. It would definitely put MCI on the block and it would be acquired quickly by one of the other Bells, Verizon or BellSouth or Qwest," Jeff Kagan, independent telecommunications analyst said in an e-mail.

MCI is the No. 2 long distance company behind AT&T.

AT&T, whose history dates back 120 years to the invention of the telephone, has been slammed by increasing competition from SBC and other dominant local carriers. The company held unsuccessful merger talks with BellSouth Corp. in 2003, but the Baby Bell walked away after seeing AT&T's revenue and growth potential shrink.

Link to article

[Brickell]

In today's business climate, it won't be long before they all merge back together again.

[Aessotariq]

Telecommunications isn't the only industry doing this... it's consolidating at an incredible pace... I was thinking about this and the mergers:

• NYNEX + Bell Atlantic
  • Bell Atlantic + GTE = Verizon

  [*]USWest + Qwest

  [*]MCI + WorldCom (and all of the companies it gobbled up)

  • Almost-merger of WorldCom and Sprint

  • Southwestern Bell + Pacific Telesys (Pacific Bell and company)

  [*]SBC + Ameritech

  • Now SBC + AT&T

  [*]Sprint + Nextel

Who would have thought that AT&T would fall flat on its face like this...

It won't be too long until the Standard Oil companies and competitors are all back together too... ExxonMobil, ChevronTexaco, etc.

[Spartan]

What exactly does SBC stand for?

Does anyone here know what companies AT&T was split up into? I know there were alot of Bell companies like Southern Bell (Now Bell South), Southwestern Bell,Pacific Bell , Bell Atlantic, etc?

[Aessotariq]

SBC is originally derived from "Southwestern Bell Corporation." As it began acquiring its sister Bell companies, SBC Communications began to take the position that "SBC" no longer stands for anything.

After the breakup of AT&T, the original Regional Bell Operating Companies were:

• Bell Atlantic

• NYNEX (New York Telephone, New England Telephone)

• BellSouth (including Southern Bell and South Central Bell subsidiaries)

• Ameritech (Ohio Bell, Cincinnati Bell, Illinois Bell, etc.)

• Southwestern Bell

• Pacific Telesis (Pacific Bell, Nevada Bell, etc)

• USWEST (Northwestern Bell, Mountain Bell, etc)

BellSouth is the only company left that hasn't merged with another, although it tried to bid for Sprint against WorldCom. It's also the only one that still uses the Bell logo. It used to operate two independent local telephone subsidiaries: Southern Bell and South Central Bell... Old phone books used to read "Southern Bell / a BELLSOUTH Company." (Also, BellSouth and SBC jointly own Cingular Wireless)

That leaves four companies:

• Verizon - formed from NYNEX, Bell Atlantic, and GTE (a non-Bell company)

• SBC - formed from Southwestern Bell, Pacific Telesis, Ameritech

• Qwest - formed after USWEST purchased Qwest Communications (a non-Bell)

• BellSouth

Not a Bell company, but still worth nothing: Sprint's LTD (Local Telecomunications Division) is being spun off as part of its merger agreement with NEXTEL Communications. LTD is the largest remaining non-Bell local telephone company.

[Spartan]

Thanks for that info. I see the need for a federal review. No need for another monoply situation.

[monsoon]

The old Bell System was made up as follows:

• AT&T - Parent Company

• Western Electric - Manufactured all equipment. From microwave towers to telephones. This was later combined with Bell Labs to form Lucent.

• Bell Labs - Development & Research arm. They made countless scientific discoveries during the 20th century. Their inventions changed life as we know it.

• Long Lines - Responsible for all intercity communications. Interconnected the various companies. This is essentially all that is left of AT&T

• Bell Operating Companies - There were 22 of them. As stated above, they were combined into the Baby Bells, which were forbidden to manufacturer equipment and provide long distance.

The entire lot is a dying breed because their primary source of income is still the regulated phone line coming into peoples homes. In these days of cable broadband and VoIP, they are losing customers in droves. (DSL is inferior to Cable and other alternatives). Mobile phones are killing them too. Add to that the cost of maintaining a local phone line due to the Baby Bells refusals to cut costs, adding on endless fees, and local and state governments tacking on taxes.

Interestingly enough, when the Internet took off, the phone system was the primary way that people got connected. It was the Bells short sighted approach to gouging their customers as much as possible and refusing to provide faster access unless that has lost them that business. It could have been much different.