AT&T Corp. and SBC Communications Inc. on Tuesday officially began the process for regulatory review of their planned merger through a joint filing with the FCC.
AT&T and SBC said the planned merger comes in response to a competitive marketplace, and new technologies like wireless and Internet phone service, which are replacing traditional wireline services.
The combination will enhance competition in the telecommunications industry and strengthen national security by continuing to support such government agencies as the Department of Defense and the White House, according to the companies, which had combined 2004 revenue of $71.2 billion.
AT&T and SBC expect the merger to close in late 2005 or early 2006 following approvals from the FCC, Justice Department and state regulators. Because of the proposed combination, SBC also expects to file documents with the Securities and Exchange Commission.
SBC Chairman and CEO Ed Whitacre told reporters last month he did not see a reason why regulators would require divestitures as a condition of the merger, but some analysts disagree.
In a research note published Jan. 31, Legg Mason said its regulatory team continues to believe that an SBC-AT&T combination would have a good chance of eventually gaining antitrust/regulatory clearance, but could be subjected to significant divestitures, particularly in SBC’s region, that complicate matters and drag the process out for 12 to 18 months.
AT&T, of Bedminster, N.J., and San Antonio, Texas-based SBC were fierce rivals battling for residential customers until AT&T decided last summer to pull back from the local and long-distance consumer phone market as a result of changing government regulations. Consequently, AT&T is no longer a major competitor to SBC in the mass market, according to the companies.
AT&T and SBC also contend the merger will not reduce competition in the enterprise market, where AT&T is a leader nationally and abroad. SBC, they say, has limited reach.
Through the $16 billion acquisition of AT&T, though, SBC would suddenly find itself competing for corporate customers with the other regional Bell phone companies, including New York-based Verizon Communications Inc.
Verizon last week announced plans to acquire MCI Inc., AT&Ts traditional rival, in a pact symbolizing a frenzy of consolidation among the biggest phone companies over the last few months.