SBC to acquire AT&T for $16 billion

SBC says the deal will give it one of the world's "most widely recognized and respected" brand names. Photos: AT&T's history of innovation

SBC Communications on Monday announced plans to acquire AT&T in a $16 billion deal, a move designed to bolster SBC's sales to enterprise customers nationwide and give it new national and global networks.

The deal also ends more than 100 years of independence for AT&T, also known as Ma Bell, which was forced by federal antitrust regulators to break up its operations in 1984. That spawned the creation of the Baby Bells, including SBC, which focused on local telephone services, while Ma Bell served as a long-distance carrier.

"The point I want to emphasize is, as a combined company, we will have greater resources and greater capabilities than we could have alone," Edward Whitacre Jr., SBC's chairman and chief executive, said during a conference call with analysts.

The deal, he said, will combine AT&T's national and global networks and expertise with SBC's strong platforms and skills in local exchange service, wireless and broadband.

The acquisition is a sign of ongoing consolidation among both traditional landline providers like SBC/AT&T and cell phone operators. Cingular Wireless, the cell phone operator partly owned by SBC, catapulted to the top of the U.S. cell phone market in late 2004 by purchasing AT&T Wireless, and Sprint is buying Nextel Communications, the cell phone operator catering mainly to businesses. With fewer choices, consumer advocates say prices of phone service will likely creep up after many years in decline.

Telephone providers have been engaged in a turf war with cable companies and Net phone carriers, which have encroached on the Bells' role as the primary source for delivering phone calls. By the same token, telephone carriers have been looking at ways to expand their markets, by delving into wireless and offering high-speed Internet connections.


Edward Whitacre
Chief executive, SBC

The purchase is expected to close in the first half of next year. SBC says the acquisition should contribute to its earnings growth in 2008, when the company says it will begin to see the fruits of $15 billion in savings, which the company says would play out over more than seven years. Those savings are expected to come through layoffs and the shutting down of duplicate facilities and equipment.

SBC shareholders bid that company's stock up 15 cents to $23.77 a share in early trading. AT&T shareholders were less enthusiastic, pushing the shares down 69 cents to $19.02 each in morning trading.

Top management at the combined company is expected to call for Whitacre to continue to serve as chairman and CEO, while AT&T's chief executive, Dave Dorman, will be president of the combined company.

"AT&T is very excited about this opportunity. It's a significant milestone for both companies," Dorman said during a conference call with analysts on Monday. "Together, SBC and AT&T will be the premiere provider for a full integration of solutions globally."

Checking out the dowry
AT&T will be bringing to the table its global IP-based networks and fast-growing voice over Internet Protocol (VoIP) business, which it sells in 100 major markets. AT&T operates 26 Internet data centers worldwide, equally divided between the United States and other countries.

"Right now, AT&T's IP network is far better than anyone else's out there," said Frank Dzubeck, CEO of Communications Network Architects, a telecommunications consultancy in Washington, D.C. "SBC, on its own, isn't even close."

SBC will also retain AT&T's brand name, though it is not clear how the

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