was acquired by Cingular Wireless LLC, a joint venture between SBC and BellSouth Corp. Struggling under its huge debt, AT&T was later forced to shed its wireless and cable operations. In a move to expand beyond its core long-distance business, which had come under fierce price pressure, AT&T spent billions early last decade to acquire a mobile phone operator and broadband cable companies. Federal Communications Commission chief Reed Hundt called "unthinkable" in the late 1990s.īut AT&T's market dominance has shrunk steadily since the government broke up its monopoly in 1984, splitting the operator into seven local Bell operating companies and a long-distance operation. The combination of AT&T and SBC will reunite "Ma Bell" with a "Baby Bell," a union that former U.S. Federal Communications Commission must approve the deal, SBC officials said. regulatory authorities, is expected to close by the first half of 2006, the statement said. The acquisition, which is subject to approval by AT&T's shareholders and U.S. "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 part of the new company's future," he said in the statement. "This deal is the logical next step in the evolution of both companies," he said.Īlthough the role of the well-known AT&T brand name in the new company is still unclear, it will not disappear, according to Whitacre. The acquisition will not mean the end of AT&T, Dorman said. AT&T also brings SBC one of the largest existing IP (Internet Protocol) networks, and one of the "world's strongest brands," Whitacre said. With the acquisition, SBC gains AT&T's enterprise-focused telecommunications business, which serves "virtually all" of the world's Fortune 1000 companies at some level, according to Dorman. "The synergies are straightforward, they're clear." "Of all the transactions I have been associated with, this deal has the greatest opportunity for synergies that I have ever seen," Stephenson said. The combined savings will be on top of cost-cutting measures the two companies already have in place. Nearly half of that cost-savings will come from combining IT and networking operations, he said. The combined company will be able to eventually achieve $15 billion in cost savings, with up to $2 billion a year by 2008, by combining functions such as IT, sales and headquarters support, said Randall Stephenson, SBC chief operating officer. Officials of both companies trumpeted the acquisition as a way to combine their strengths and cut costs, or achieve "synergies," as they called it. In addition, AT&T will pay its shareholders a special dividend of $1.30 per share, bringing the total consideration for each AT&T share to $19.71, and valuing the deal at around $16 billion, it said. 28 closing price of SBC's stock, this exchange ratio equals $18.41 per share. Under terms of the agreement, shareholders of AT&T will receive 0.77942 shares of SBC common stock for each common share of AT&T, the statement said. Whitacre will remain in his current position, while AT&T Chairman and Chief Executive Officer David Dorman will become president of the merged company, to be based in San Antonio, Texas, where SBC has headquarters. "We will position SBC to be the prototype 21st-century communications company in America today," Whitacre said. The acquisition will be "great for the stockholders," with the merged company expected to be cash-flow positive in 2007, SBC Chairman and Chief Executive Officer (CEO) Ed Whitacre said in an investor conference call Monday. The deal will create the largest telecommunications carrier in the U.S. in a deal worth US$16 billion, the company said in a statement Monday.
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