Bye Ma-Bell!
Posted on 01/27/2005 12:11:30 AM PST by HAL9000
SBC Communications, the second-largest regional phone company in the nation, is in talks to buy AT&T for more than $16 billion, according to executives close to the negotiations.A deal, if reached, would be the final chapter in the 120-year history of AT&T, the first technological giant of the modern age and the original model for telecommunications companies worldwide. A deal would be a reunion of sorts, putting back together some of the largest pieces of the Ma Bell telephone monopoly, which was broken up in 1984.
The talks, which the executives described as "fluid" and "very, very sensitive" would unite SBC, a Baby Bell with some 50 million local-line customers, with AT&T, its much-diminished former parent.
AT&T, which only two decades ago ranked among the nation's very largest companies, is a shadow of its former self, focusing almost exclusively on corporate customers. Last year, AT&T said it would no longer market itself to its traditional retail customers.
Still, the executives cautioned that the talks could very well collapse. Indeed, AT&T has been in talks before. In 2003, negotiations between the company and BellSouth fell apart at an advanced stage when BellSouth saw how weak AT&T's prospects were. The executives involved in the current talks said that many issues, including a final price, had yet to be resolved.
Spokesmen for the two companies declined to comment.
The talks come as the telecommunications landscape has shifted from traditional fixed-line service to faster-growing, higher-margin businesses like wireless, broadband and corporate services. And with pricing wars continuing, telecommunications companies are looking to merge or risk being put out of business.
In theory, SBC and AT&T have complementary technology. SBC has a strong presence in California, Texas and Illinois, although, as with all the Bell companies, its fixed-line business has slid as customers use their cellphones more.
SBC has also made a strong push to sell broadband lines to consumers and is expanding its fiber optic network to provide video services in the coming year or two. The company also resells satellite television service from the DISH Network.
AT&T, on the other hand, has the largest international fiber network and the deepest client list of major corporations, which are considered valuable because they buy services in bulk. AT&T is also a major provider to the government and to companies that operate globally.
While SBC continues to grow slowly thanks to demand for its high-speed Internet lines, AT&T's business is expected to shrink about 15 percent this year. It is trapped in a vicious price war with its main rival, MCI. Verizon Communications, the largest regional Bell company, and SBC have also started marketing heavily to small businesses.
Regulators would be unlikely to block a merger given AT&T's diminished role in the industry. The company suffered a setback last year when the Bells won the right to raise fees they charge companies like AT&T for access to their local networks. One result of that was the decision last July to no longer market local phone service to residential consumers. AT&T now has about 25 million residential customers and about 3 million corporate customers
Despite its woes, AT&T has worked hard to cut costs, reduce debts and write down the value of its assets. The moves have made the company, even with its problems, more attractive to companies in search of the big corporate clients that AT&T has.
In the fourth quarter, AT&T's profit rose 84 percent, to $625 million, beating Wall Street's estimates. The jump came mostly because of cost-cutting efforts, including a 23 percent reduction of its work force last year.
SBC reported its fourth-quarter results yesterday, saying its sales rose as profits fell in its fourth quarter
SBC, based in San Antonio, said it earned 23 cents a share in the quarter ended Dec. 31. The company said that figure would have been 34 cents if not for one-time costs, including severance payments and expenses from the $41 billion acquisition of AT&T Wireless by its Cingular Wireless venture.
In the period a year ago, SBC earned 27 cents a share.
SBC said its fourth-quarter operating revenue was $10.3 billion, compared with $10 billion a year ago. It attributed the growth to the addition of 425,000 high-speed Internet lines and a considerable slowdown in the erosion of its traditional telephone business. Edward E. Whitacre Jr., SBC's chief executive, has said repeatedly that he is more focused on dealing with Cingular, which it owns with BellSouth.
Mr. Whitacre, like his counterpart at BellSouth, Duane Ackerman, are known for their cautious approach to investing and prudent use of their companies' money.
Still, according to industry analysts, AT&T's chief executive, David W. Dorman, has been eager to sell the company and perhaps, with the company now leaner, he may have found a buyer.
let us hope this merger seals the doom of the corporate pariah known as MCI!
Chinese buying IBM... a baby Bell buying AT&T. Sign of the end times?
Any information on the ownership structure of SBC???
Publically held. Congomerate of former bell cmapanies such as South Western Bell, Pacific Bell & Nevada Bell. Ed Whitacre is the CEO. Do a google.
Thanks.
Sometimes it's easier just to ask here since there is bound to be a freeper who knows the info!!
No, AT&T is well past ripe - more like rotting on the tree. They have shed their best assets, and are now left with what is essentially a long distance service which will face increasing competition from VOIP. While most of their remaining customers are residential, they are trying to exit that business and will end up with a small core of commercial accounts.
Thanks to that *rick Michael Armstrong, who's only goal at AT&T was to make Michael rich, sold off the the best two assets they had; cable & wirless. Why? The supposed reason was because Wall St. got their panties in a wad over the high debt and dropping stock prices.
Kinda of makes sense to sell off your two growth areas doesn't it? Yea, that's what they teach in business school.
If the board had told Armstong to shove it, and held firm with Wall St. and cut costs in other areas, they could have ridden out their debt issues and have been competetive today.
More than 30 years ago, the Bell System could break even just on their pay phone income. Everything else was profit. Today? Ha!
Yes, they had a good business plan when they bought TCI and finally gained the "last mile" into folks homes. Between the cable and the wireless, they could have put together a full service telecom company. They were certainly better to do business with than either TCI or Comcast.
I suspect when the dust clears, if Southwestern Bell buys, it will be only a part and not the whole company. If they do buy the whole thing, it will not reflect well on the SBC management.
30 years ago Ma had a built in profit margin of around 15~25% and the labs guys could order anything they wanted (self approved).
Of course, they were also getting enough results that they could justify all that.
I worked for AT&T for a short time in the 90s. We were a non-telephone related subsidiary that they purchased. While I was there they sold off the Universal Card, which struck me as stupid since it seemed UC was rolling in dough, but what did I know? They also spun off Lucent, losing the R&R powerhouse that was formerly known as Bell Labs.
NJ installed a placeholder president at our plant who only talked about getting back to NJ. We must have been a Siberia to him. The suits used to come in from the mothership from time to time. All they talked about was "minutes on the network" (long distance). None of them could see that the old days of expensive LD was doomed with cell phones, Internet and other innovations. They were all in a time warp from the 1960s.
I knew they were going to sell our little company and found a new job at a different company.
At one time AT&T was one of the most recognized brands in the world. I wonder if they'll keep the old globe logo. Amazing times...
The great thing about VOIP is that it's not taxed by the FCC (yet).
How times change. A Baby Bell now seeks to swallow Ma Bell.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.