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May 28, 1997updated 05 Sep 2016 12:12pm

AT&T “CHASING $50BN TELECOM MEGA MERGER WITH SBC”

By CBR Staff Writer

Thirteen years after AT&T Co split apart from the seven regional Bells following anti-trust scrutiny, it appears to be trying to put itself back together again and is reportedly seeking a merger with SBC Communications Corp in a deal valued at a whopping $50bn. SBC comprises the huge Southwestern Bell and Pacific-Telesis Group local phone operators, giving it a virtual monopoly of local and wireless services in the Southwest and California. Indeed SBC’s recent application to begin long-distance services in other US markets was turned down on the grounds it hasn’t made enough effort to open up its own local markets. SBC, which provides local services to seven of the ten largest US cities, has a market value of $51.87bn and turned over $23.49bn in 1996. A combined company would have revenues of $80bn, 230,000 employees and own 60% of the $80bn US long distance market. It would be the largest merger ever. The Wall Street Journal, which believes the companies will go public on their talks soon, says AT&T has been holding similar discussions with Southeast local operator BellSouth Corp, but that talks with SBC are farthest along. AT&T has also been talking with the UK’s Cable & Wireless Plc about expanding abroad. The 1996 Telecommunications Act is expected to mean AT&T will lose a significant chunk of its key US long distance telephone market to competitors over the next few years, and in response the company is attempting to break into the market for local voice and data services on several fronts. It is already developing a new home-based wireless system that could cut local carriers out of the loop. If the merger were to be allowed – and the regulatory hoops that AT&T will have to climb through, including antitrust scrutiny and resistance from competitors, mean such a deal would be unlikely to complete for at least two years – it would be far larger than Bell Atlantic Corp’s $23bn merger with Nynex Corp. Fast-growing long distance company LCI International has already said it’s against any such merger. There would certainly be lay-offs, as AT&T is already halfway through cutting 17,000 jobs. The Journal thinks it’s possible that SBC executives could end up running a merged company as AT&T chairman Robert Allen is close to retiring while president John Walter has been on board for only seven months. Neither company was available for comment. Federal Communications Commission chairman Reed Hundt, who resigned yesterday to spend more time with his family, told a press conference that questions would sure to be raised over the sheer size of such a combination, let alone anything else. News of the reported bid comes just as British Telecommunications Plc is completing its takeover of MCI Communications Corp, the second largest US long distance carrier. AT&T shares rose $1.25 to reach $37.37 on the day. SBC shares advanced $0.62 to close at $57.50.

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