AT&T to merge with Bellsouth

Stuart Corner
Tuesday, 07 March 2006 09:55

IT Industry - Strategy

AT&T, the company formed by the recent merger of US RBOC, SBC with the former AT&T is to merge with another US RBOC, Bellsouth in what will represent a major consolidation of the US telecommunications industry.

The all stock deal values Bellsouth at $US67 billion and will see Bellsouth shareholders receive 1.325 AT&T shares for each Bellsouth share, a 17.9 percent premium over Bellsouth's closing share prices on 3 March. It will also bring one of the US largest cellular networks, Cingular, presently owned jointly by AT&T and Bellsouth under one owner.

According to AT&T, "Since AT&T and BellSouth are not actual competitors in the local, long distance and video markets, and because BellSouth is not a significant competitor with AT&T in the enterprise market, the merger will not reduce competition in any of those markets."

Streamlining and enhancing the management and operations of Cingular will be one of the most immediate benefits of the merger, the companies claim. "The Cingular partnership and the company itself are performing extremely well, particularly after the AT&T Wireless acquisition," said AT&T CEO, Ed Whitacre. "But no partnership between two independent companies, no matter how well run, can match the speed, effectiveness, responsiveness and efficiency of a solely owned company.

'While the majority of Cingular's operations will remain unchanged, simplifying the ownership structure will lead to more efficient marketing and service provisioning, which will come under a single AT&T brand, generating further financial synergies and customer benefits."

When the AT&T monopoly of US telephone services was broken up in 1984. AT&T's local telephony services were spun off into seven regional bell operating companies, barred from offering long distance services, and AT&T was restricted to long distance and international services.

These restrictions were removed in 1996 leading to rapid consolidation among the RBOCs.  Of the seven, prior to the merger of SBC with AT&T only four remained: SBC, Verizon, Qwest and BellSouth.