SBC Communications To Buy AT&T For $16 Billion

SAN ANTONIO ? AT&T, the company founded 130 years ago by telephone creator Alexander Graham Bell, has tentatively been acquired by SBC Communications in an all stock deal worth $16 billion – creating the nation?s largest phone company. SBC is the dominant telephone company in Michigan as well.

If approved by regulators, the deal combines AT&T with one of the seven Baby Bells created when the federal government broke up AT&T in 1984. At that time, AT&T focused on long distance telephone service and the Baby Bells local phone service. But in this era where wireless, cable and Internet also connects telephone calls, that model has become obsolete.

“We are combining AT&T’s national and global networks and expertise with SBC’s strong platforms and skills in local exchange service, wireless and broadband,” Edward Whitacre Jr., SBC’s chief executive, said in a statement.

Under the deal, AT&T shareholders will receive 0.77942 shares of SBC common stock for every share of AT&T, which translates into $18.41 a share.AT&T investors will also receive $1.30 a share in a special dividend.

SBC will also retain AT&T’s brand name, though it was not immediatly clear in which capacities.

Experts said the deal signals the ambition of SBC to dominate the one sector of the U.S. phone industry where it has made little progress – providing phone and data services to large businesses.

The AT&T acquisition will likely spark a flurry of deal making that could see AT&T’s largest rival, MCI, become a prize for another of the giant Bell companies looking at the corporate-services market.

The combined SBC-AT&T would dominate business services, cell phones, residential long-distance and telephone-based Internet broadband access, and will be second only to cable company Comcast in the overall residential broadband market. SBC already owns 60 percent of Cingular Wireless, the largest cell phone company, and through the deal would get access to AT&T’s coveted corporate customers.

If completed, a combined SBC and AT&T would set the stage for an all-out war between phone giants and cable companies. Cable companies have been encroaching on the phone industry’s turf, as they seek to gain control of telecommunications access to consumers’ homes. Moreover, in the past few years, the Bells have been losing customers to alternative services such as cell phones and Internet calling. The deal would give SBC more sources of revenue and reduce its exposure to its threatened core business.