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COLORADO SPRINGS, Colo. — Nine months after analysts began wondering whether the AT&T logo might disappear, the revamped SBC Communications/AT&T on Sunday (March 5) made a $67 billion stock offer for BellSouth Corp.
If approved, the deal would restore a significant portion of the national footprint of AT&T as it was before divestiture, at least in the southern portion of the United States.
The merger would also mean the loss of more than 10,000 jobs, AT&T acknowledged on Monday.
When SBC recently completed its acquisition of AT&T, the company surprised most market analysts taking the name AT&T Inc., evoking memories of the former AT&T Co. On Sunday, AT&T offered 1.325 shares of AT&T common stock for each share of BellSouth, or $37.09 for each BellSouth share.
Since the merger would create an AT&T with a national scope rivaling that of the old Ma Bell, some question whether the Justice Department might prohibit the deal. But while today’s telecommunications markets are vastly larger than in the pre-1984 Bell monopoly era, they are also far more diverse. Indeed, the eclipsing of circuit-switched voice by voice-over-Internet Protocol may have rendered the rationale for the 1984 AT&T breakup obsolete, one source said.
“The model for separating interexchange services from local-area services was based on the differing profitability of voice calls,” said the source, a former Qwest executive who now is a consultant for an Internet service provider. But “with the Internet, distance means nothing, and there’s no profit left in TDM voice. There really aren’t any pure-play interexchange companies left, except maybe Level 3 and a couple of others. With cable operators and specialty broadband providers entering the Internet market, even if a complete pre-1984 AT&T footprint were cobbled together, AT&T would have nowhere near the monopoly they had in voice days.”
The BellSouth merger would bring all Cingular Wireless assets and ownership under one roof, since BellSouth holds the minority stock position in Cingular not held by AT&T. Separate branding for Cingular Wireless and BellSouth services would cease as the merger moves forward, with all wireline and wireless services moving under the AT&T brand.
But the former Qwest executive said Cingular has a better brand reputation than AT&T Wireless, a factor that should suggest caution in integrating branding. Wireless’ contribution to revenue in 2007 is expected to exceed one-third the total revenue of the combined companies.
The other significant area of joint development will come in next-generation fiber-to-the curb networks for broadband access. One factor increasing the attractiveness of BellSouth’s region was “fiber optics deeply deployed in the service area,” AT&T chairman and chief executive officer Ed Whitacre said in a statement.
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