Calling the acquisition of BellSouth Corp. a logical next step, AT&T Inc. executives in a conference call today outlined the deals synergies, saying it means better wireless expansion and service to businesses.
The $67.1 billion purchase of BellSouth means the former SBC Communications Inc. will have gobbled up rivals AT&T Corp. and BellSouth Corp. and obtained full ownership of Cingular Wireless LLC. BellSouth and the new AT&T share ownership in the company. Once the merger is approved, AT&T plans to keep Cingular and BellSouth which will be renamed AT&T headquarters in Atlanta.
AT&T said it will continue rolling out its IP services and will bring BellSouths initiatives under its auspices.
The world is changing, and its changing faster and faster, and [we knew] the sooner we did this deal, the better off wed be, said Edward E. Whitacre Jr., chairman and CEO of AT&T. That includes IP networks, Cingular, video all of those factors led to the conclusion that the sooner the better.
AT&Ts purchase of BellSouth and Cingular means the loss of 10,000 jobs over the next three years, said CFO Rick Linder. Those cuts are in addition to the 13,000 jobs that will be phased out by 2008 from the SBC-AT&T merger.
Asked whether AT&T will continue its M&A track, Linder responded obliquely, saying, We feel very good about the assets we have We obviously have a lot on the plate in front of us. There was no discussion of how the deal looks to herald the return of the Ma Bell monopoly.
AT&T must receive regulatory approvals in the United States and overseas; executives said they expect to close the merger within 12 months. I dont see any regulatory issues attached to this, said Randall Stephenson, AT&Ts COO.
Merrill Lynch analyst David Janazzo agreed with that stance.
We think that deal approval is likely for the horizontal merger, supported by the intermodal competition argument, he wrote in a research note. First, the combination does not change RBOC ownership of wireless AT&T and BellSouth already own Cingular. Second, access line losses in the 5 percent to 6 percent range are evidence of intermodal competition, to date primarily from wireless in the future, increasingly from cable.
Janazzo said the implications for telecommunications companies are neutral to positive.
The wireless market structure is unchanged, although the Cingular brand will be replaced by AT&T. It is possible that wireline divestitures may result, but a number of natural wireline consolidators are developing. The merger eliminates a primarily regional competitor in the enterprise space, he said.
All signs point to what will happen next with the other pieces of Ma Bell. Analysts speculate that Verizon Communications Inc. could make a move for another company, while Qwest Communications International Inc. which has suffered accounting scandals and failed merger bids likely will remain as-is for the short term, Janazzo noted.