AT&T agreed to acquire BellSouth for $67 billion, representing a 17.9% premium to the closing price of BellSouth stock on March 3 and marking a key step in reconstituting the old AT&T empire.
AT&T Chairman and CEO Edward E. Whitacre Jr. described the deal as "the next logical step," saying the combined company would be better positioned to "speed the convergence of new and improved services for consumers and businesses, and embrace the industry's shift to IP network-based technologies."
By integrating the ownership of Cingular Wireless, AT&T said the merger would increase its overall growth profile. Wireless is expected to represent about one-third of the combined company's revenues in 2007. It would also enable expanded opportunities in business markets.
The companies argue that 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.
Some key points of the deal:
AT&T Chairman and CEO Edward E. Whitacre Jr. described the deal as "the next logical step," saying the combined company would be better positioned to "speed the convergence of new and improved services for consumers and businesses, and embrace the industry's shift to IP network-based technologies."
By integrating the ownership of Cingular Wireless, AT&T said the merger would increase its overall growth profile. Wireless is expected to represent about one-third of the combined company's revenues in 2007. It would also enable expanded opportunities in business markets.
The companies argue that 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.
Some key points of the deal:
- AT&T's U.S. network assets include 50.2 million access lines (SBC-only access lines), more than 7 million DSL lines and access to more than 18,000 Wi-Fi hot spots in 42 countries. The new AT&T global backbone network includes more than 1,500 managed MPLS nodes providing services in 127 countries; more than 86,000 MPLS ports in service for customers; 30 data centers across the globe; and 434,000 fiber route miles.
- The new AT&T (SBC + AT&T) had 2005 revenue of $43.9 billion and 2005 net income: $4.8 billion. It serves 49.4 million local lines and 6.9 million broadband lines. Total headcount is at 190,000.
- BellSouth serves 20.0 million access lines, approximately 7.2 million long-distance customers and nearly 2.9 million DSL subscribers.
- BellSouth, which has a market capitalization: $56.6 billion, currently ranks as the No. 3 U.S. local telephone company, with 2005 revenue of $20.55 billion and net income of $3.3 billion. BellSouth has approximately 63,000 employees.
- Cingular Wireless is the leading U.S. mobile operator with 54.1 million customers as of year-end 2005. It has approximately 64,000 employees. AT&T currently holds a 60% ownership interest in Cingular Wireless while BellSouth holds 40%.
- Cost synergies are expected to reach an annual run rate exceeding $2 billion in the second year after closing, and the net present value of expected synergies is estimated at nearly $18 billion.
- The merger will also allow for closer integration of the company's wireless, wireline, and IP products and services over a single global IP network.
- Mr. Whitacre will serve as chairman, CEO and a member of the board of directors of the combined company. Mr. Ackerman will serve as chairman and CEO of BellSouth operations for a transition period following the merger.
- AT&T's financial advisors include Lehman Brothers Holdings and BellSouth's financial advisors include Citigroup and Goldman Sachs.
- AT&T will issue 2.4 billion new shares of common stock, which would represent 38 percent of the outstanding shares of AT&T.
- In November 2005, SBC Communications completed its acquisition of AT&T.
- In October 2004, Cingular Wireless completed its $41 billion acquisition of AT&T Wireless.
