Jones Lang LaSalle
AT&T to Buy BellSouth, Creating Telecom Giant
March 5, 2006
By KEN BELSON
The AT&T Corporation said this afternoon that it would acquire the BellSouth Corporation for stock it valued at $67 billion, in a merger that would create a telecommunications behemoth serving nearly 70 million local phone customers and controlling all of Cingular Wireless.
AT&T is already the nation's largest phone company, while BellSouth, which operates in a nine-state region in the Southeast, is third behind Verizon Communications. A combined AT&T-BellSouth would have $130 billion in sales and serve residential customers in 22 states.
While consumer groups and AT&T's main rivals are likely to argue that the deal would concentrate too much power in AT&T's hands, federal antitrust regulators have not blocked large deals in recent years. The companies do not compete in the local phone and Internet businesses, and they already jointly own Cingular, the country's biggest cellphone company.
As a result, consumers already buying services from AT&T, BellSouth and Cingular are unlikely to be affected directly. But the purchase would give AT&T more firepower to fight Comcast and other cable television companies that are quickly moving into the phone business.
A union between AT&T and BellSouth had been long rumored because of their mutual stake in the fast-growing wireless industry. In a statement this afternoon, AT&T's chairman and chief executive, Edward E. Whitacre Jr., called the deal "a next logical step" and asserted that the merger "will strengthen Cingular through unified ownership and a single brand."
Mr. Whitacre added, "No partnership between two independent companies, no matter how well run, can match the speed, effectiveness, responsiveness and efficiency of a solely owned company."
Under the terms of the deal, shareholders of BellSouth will receive 1.325 shares of AT&T common stock for each BellSouth common share. Based on AT&T's closing stock price on Friday, this would value the deal at $37.09 for each BellSouth common share. That represents a 17.9 percent premium over BellSouth's closing stock price on Friday.
Mr. Whitacre has not been shy about paying top dollar for rivals to create a giant company that plays a major role in nearly every corner of the telecommunications industry. As chief executive of SBC Communication, he oversaw his company's $16 billion acquisition of AT&T last year and took over its name.
"The empire-building continues," said Jeffrey Halpern, an industry analyst at Sanford Bernstein. "He has a track record of gobbling competitors at premium prices."
In the past decade, SBC under Mr. Whitacre bought three other local phone companies, the Pacific Telesis Group, Southern New England Telecommunications and the Ameritech Corporation.
Cingular bought AT&T Wireless in 2004.
AT&T will keep its name once the deal for BellSouth is completed, and Mr. Whitacre will remain as its chairman and chief executive.
The combined company will dwarf its nearest competitor, Verizon, which is bound to face more pressure to bulk up, too. After SBC made its bid to AT&T last year, Verizon rushed to buy he long-distance carrier MCI Inc. Verizon ultimately beat out Qwest Communications for control of MCI after a protracted fight.
Verizon's next move is likely to try to dissolve its relationship with Vodafone, which owns 45 percent of Verizon Wireless, according to industry analysts. Verizon has expressed interest in buying Vodafone's share, but the price tag is likely to be steep because Verizon Wireless is extremely profitable.
Verizon also might pursue Qwest, which is less likely because the company, the primary local phone provider in the western United States, is saddled with heavy debts, analysts say.
Either way, the remaining Bell telephone companies still must do battle with the cable industry and others moving fast into the phone business. The growing use of e-mail, cellphones and other technology has also eroded AT&T's core business selling local phone lines.
AT&T and Verizon have tried to offset those declines by offering their own new television services. But the construction of the networks to carry their programming is proving expensive to build.
Copyright 2006The New York Times
AT&T to Buy BellSouth, Creating Telecom Giant
March 5, 2006
By KEN BELSON
The AT&T Corporation said this afternoon that it would acquire the BellSouth Corporation for stock it valued at $67 billion, in a merger that would create a telecommunications behemoth serving nearly 70 million local phone customers and controlling all of Cingular Wireless.
AT&T is already the nation's largest phone company, while BellSouth, which operates in a nine-state region in the Southeast, is third behind Verizon Communications. A combined AT&T-BellSouth would have $130 billion in sales and serve residential customers in 22 states.
While consumer groups and AT&T's main rivals are likely to argue that the deal would concentrate too much power in AT&T's hands, federal antitrust regulators have not blocked large deals in recent years. The companies do not compete in the local phone and Internet businesses, and they already jointly own Cingular, the country's biggest cellphone company.
As a result, consumers already buying services from AT&T, BellSouth and Cingular are unlikely to be affected directly. But the purchase would give AT&T more firepower to fight Comcast and other cable television companies that are quickly moving into the phone business.
A union between AT&T and BellSouth had been long rumored because of their mutual stake in the fast-growing wireless industry. In a statement this afternoon, AT&T's chairman and chief executive, Edward E. Whitacre Jr., called the deal "a next logical step" and asserted that the merger "will strengthen Cingular through unified ownership and a single brand."
Mr. Whitacre added, "No partnership between two independent companies, no matter how well run, can match the speed, effectiveness, responsiveness and efficiency of a solely owned company."
Under the terms of the deal, shareholders of BellSouth will receive 1.325 shares of AT&T common stock for each BellSouth common share. Based on AT&T's closing stock price on Friday, this would value the deal at $37.09 for each BellSouth common share. That represents a 17.9 percent premium over BellSouth's closing stock price on Friday.
Mr. Whitacre has not been shy about paying top dollar for rivals to create a giant company that plays a major role in nearly every corner of the telecommunications industry. As chief executive of SBC Communication, he oversaw his company's $16 billion acquisition of AT&T last year and took over its name.
"The empire-building continues," said Jeffrey Halpern, an industry analyst at Sanford Bernstein. "He has a track record of gobbling competitors at premium prices."
In the past decade, SBC under Mr. Whitacre bought three other local phone companies, the Pacific Telesis Group, Southern New England Telecommunications and the Ameritech Corporation.
Cingular bought AT&T Wireless in 2004.
AT&T will keep its name once the deal for BellSouth is completed, and Mr. Whitacre will remain as its chairman and chief executive.
The combined company will dwarf its nearest competitor, Verizon, which is bound to face more pressure to bulk up, too. After SBC made its bid to AT&T last year, Verizon rushed to buy he long-distance carrier MCI Inc. Verizon ultimately beat out Qwest Communications for control of MCI after a protracted fight.
Verizon's next move is likely to try to dissolve its relationship with Vodafone, which owns 45 percent of Verizon Wireless, according to industry analysts. Verizon has expressed interest in buying Vodafone's share, but the price tag is likely to be steep because Verizon Wireless is extremely profitable.
Verizon also might pursue Qwest, which is less likely because the company, the primary local phone provider in the western United States, is saddled with heavy debts, analysts say.
Either way, the remaining Bell telephone companies still must do battle with the cable industry and others moving fast into the phone business. The growing use of e-mail, cellphones and other technology has also eroded AT&T's core business selling local phone lines.
AT&T and Verizon have tried to offset those declines by offering their own new television services. But the construction of the networks to carry their programming is proving expensive to build.
Copyright 2006The New York Times
posted by Jones Lang LaSalle NJ News Blog at 3:03 PM
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