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AT&T to buy BellSouth in $67 billion deal

Didn’t Cingular just acquire AT&T Wireless? What are they playing “name your price” or something?  How many times are these 2 companies going to go back and forth? 

Substantial job cuts expected when telecom mega-deal is completed

ATLANTA - While AT&T Inc.’s $67 billion bid for BellSouth Corp. would expand the number of voices using the country’s largest telecommunications company, it may end up sounding more like a hang up for some employees.

San Antonio-based AT&T expects the acquisition announced Sunday to save it $2 billion annually, partially from job cuts and combining the two work forces.

Officials would not say how many jobs might be cut if the deal is approved by shareholders and regulators over the next year, but staff reductions are common in such mergers. Cingular Wireless LLC, a joint venture of AT&T and BellSouth, cut about 7,000 jobs after its $41 billion acquisition of AT&T Wireless in October 2004.

More savings from the proposed acquisition would come from reduced advertising expenses and combining the backbone network and information-technology operations of the companies.

The purchase of Atlanta-based BellSouth would give AT&T total control of Cingular, the nation’s largest cell phone provider, and BellSouth’s nine-state network. Together, the three companies employ more than 316,000 people.

AT&T will pay 1.325 of its own shares for each BellSouth share. Based of Friday’s closing price of $27.99 for AT&T shares, that works out to be $37.09 for each BellSouth share, an 18 percent premium from the Friday closing price of $31.46 for the company.

BellSouth shares surged $3.85, or more than 12 percent, to $35.31 in pre-market trading Monday. Shares of AT&T slipped 21 cents to $27.78 in pre-market trading.

The deal appears to be the largest yet among U.S. telecom players and goes a long way toward resurrecting the old Ma Bell telephone system, which was broken apart in 1984.

The merged company would have 70 million local-line phone customers, 54.1 million wireless subscribers and nearly 10 million broadband subscribers in the 22 states where they now operate.

The deal would substantially expand the reach of AT&T, already the country’s largest telecommunications company by the number of customers served. BellSouth is the dominant local telephone provider in the Southeast.

The Cingular brand would likely be phased out in favor of the AT&T brand. The name will be familiar to wireless customers: AT&T Wireless Inc., a spin-off of AT&T, was acquired by Cingular in October 2004. The BellSouth name also would be absorbed in the deal.

“It’s going to be confusing,” said industry analyst Jeff Kagan. “This is the reinvention of the telecommunications industry.”

Cingular spokesman Mark Siegel dismissed the notion there would be public perception issues with the switch back to the AT&T name for the wireless company.

“We built a business,” Siegel said. “Is the brand an important part of that business? Yes. But it is a business that is made primarily up of people. None of that changes.”

The shift in the U.S. telecom landscape — moving from four to three regional Bell operators — also is sure to garner close review from Washington.

The deal furthers the reunification of the Baby Bells, the eight regional telephone operators that were spun off from the old AT&T in 1984 under a federal court order. At that time, and in a different regulatory climate, AT&T was largely a long-distance company.

“Twenty years after the government broke up Ma Bell, this deal represents a mother and child reunion,” said Rep. Ed Markey, the ranking Democrat on the House Subcommittee on Telecommunications and the Internet.

“Our nation’s telecommunications markets must be vigorously competitive and open to innovation in order to promote job creation and economic growth,” Markey said. “This merger proposal is one that unquestionably merits the utmost scrutiny by government antitrust officials.”

The combined AT&T and BellSouth would be the country’s largest supplier of broadband Internet access. Their combined 9.8 million DSL lines (at the end of last year) would vault them past the current leader, cable company Comcast Corp., with 8.5 million broadband subscribers.

With cable companies increasingly vying for traditional phone companies’ share of local telephone service, such mergers in the industry have been commonplace of late. Kagan, the industry analyst, said more could be on the horizon.

“We’re not over it yet,” Kagan said.

© 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Posted by loni on 03/06 at 08:35 AM in News

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