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Mergers & acquisitions

Ma Bell Is Back!

As rumored for weeks, Ma Bell is back with a vengeance. (See Is an SBC/BellSouth Merger Next?.)

AT&T Inc. (NYSE: T) and BellSouth Corp. (NYSE: BLS) have agreed to merge in a blockbuster $67 billion deal, the two companies said in a statement on Sunday.

As part of the deal, shareholders of BellSouth will get 1.325 shares of AT&T stock for each share of their BellSouth stock. Based on AT&T's closing stock price on March 3, this exchange ratio equals $37.09 a share -- a premium of nearly 18 percent over BellSouth's closing price on March 3.

And, though the merger would represent a further undoing of the monopoly breakup of the old AT&T, the two companies, in a statement Sunday, said that the combination would promote competition.

"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," the statement said.

And, the post-merger company will be under one name and one brand -- AT&T, the statement says. Former SBC CEO Ed Whitacre will serve as chairman and CEO of the newly formed company. BellSouth CEO Duane Ackerman will serve as chairman and CEO of BellSouth operations for a transition period following the merger, the statement says.

The merger will have a simplifiying effect on the wireless landscape. Both companies now jointly own Cingular, and, under an AT&T/BellSouth combination, Cingular would be under one company and one brand.

AT&T and BellSouth say they'll mutually realize some $18 billion in cost savings from combining the two telecom empires. Much of that savings will come from reduced costs in the operations of unregulated and interstate services, shedding loads of corporate staff, and some "productivity improvements," which weren't specified in the company press release.

AT&T says its financial outlook for 2006 hasn't changed. (See AT&T Updates 2006 Plans and AT&T Shines a Light on Lightspeed.) It continues to expect double-digit adjusted EPS growth in each of the next three years with significant growth in free cashflow after dividends. The carrier's free cashflow after dividends is expected to exceed $4 billion in 2007 and $6 billion in 2008.

The deal is expected to close within 12 months.

— Phil Harvey, News Editor, Light Reading

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Stevery 12/5/2012 | 4:03:41 AM
re: Ma Bell Is Back! Lucky that you decided to check the ol' Internet newswire on a sunday, Phil. But what will your minister say?

Probably that he is damned to hell. Again.

(PS. And I'll buy the first round when you get there.)
rma153 12/5/2012 | 4:03:40 AM
re: Ma Bell Is Back! Well for one, SBC (AT&T) has a habit of taking over - everything, including technology. So, I'd guess FTTC goes by the wayside soon. And now it's the TwoBOC, not the TriBOC RFP, so, GPON may get more focus.
jes 12/5/2012 | 4:03:40 AM
re: Ma Bell Is Back!
Whats the impact of this mega merger for the vendor community ? Any speculation which of the vendor will be most impacted, though it may be too early to ask.
paolo.franzoi 12/5/2012 | 4:03:40 AM
re: Ma Bell Is Back!
Check out Phil's Church on-line!

http://www.churchofsatan.com/

seven
netboarder 12/5/2012 | 4:03:39 AM
re: Ma Bell Is Back! Sorry to break your word (are you like, a talking bear or something?), but the real Lord's day is actually Saturday (Shabbat)...
edzed 12/5/2012 | 4:03:39 AM
re: Ma Bell Is Back! Bellsouth was by far Redback's largest customer in Q4, and responsible for the vast majority of Redback's backlog growth. Alcatel won the edge router biz for SBC's Project Lightspeed. Redback has the DSL business at SBC. Live by the sword and...well I guess we will see what comes next.
melao 12/5/2012 | 4:03:38 AM
re: Ma Bell Is Back! "Well for one, SBC (AT&T) has a habit of taking over - everything, including technology. So, I'd guess FTTC goes by the wayside soon. And now it's the TwoBOC, not the TriBOC RFP, so, GPON may get more focus."

Maybe they will merge with Lucent. :D Ah the good old times!
DCITDave 12/5/2012 | 4:03:34 AM
re: Ma Bell Is Back! The full deal terms, from the AT&T PR office:

* AT&T Inc. will acquire 100 percent of the common stock of BellSouth Corporation in an all-stock transaction with an equity value of $67.1 billion.

* For each share of BellSouth common stock, BellSouth stockholders will receive 1.325 shares of AT&T common stock. This represents 17.9 percent premium to the closing price of BellSouth stock on March 3.

* AT&T will issue 2.4 billion new shares of common stock, which would represent 38 percent of the outstanding shares of AT&T.

* The merger has been approved by the boards of directors of BellSouth and AT&T. Stockholders of each company also must approve the merger.

* Three BellSouth board members will join the AT&T board at closing.

ph
DCITDave 12/5/2012 | 4:03:33 AM
re: Ma Bell Is Back! Another item of note, also from AT&T PR:

Total revenues, including Cingular, are expected to return to growth in 2007, a year earlier than previous guidance. AT&T expects free cash flow after dividends from the combined company to provide the flexibility to continue reducing debt levels over the next five years while providing excellent cash returns to stockholders.
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