Regional Bell operating company SBC Communications Inc has announced a proposed $4.4bn bid for long distance operator Southern New England Telecommunications. The transaction will combine both companies wireless local telephone operations. Southern New England Telecommunications provides telecommunications services including traditional wireline, wireless, long distance, internet and data in Connecticut, in addition to wireless service in Rhode Island and western Massachusetts. SBC provides wireless service in the Northeast markets of Boston, upstate New York and Washington, DC/Baltimore. SBC has been growing explosively since 1996 when it acquired Pacific Telesis Group Inc for $16bn, and now has a massive market capitalization of $67.3bn, on revenue of $23.5bn. Southern New England adds revenue of $1.99bn. SBC is riding high at the moment, having just had key sections of the 1996 Telecommunications Act overruled in its favor. The deal still requires regulatory approval but if it is completed, can be seen as much as a defensive move from SBC, as it will shut out the long distance players from entering the local market by acquiring SNET – a large non-RBOC local and national carrier. The share swap deal adds to an already feverish telecoms takeover climate, with WorldCom’s takeover of MCI Corp, Brooks Fiber Properties Inc, and MFS Communications Inc and the merger of the two bells Nynex Corp and Bell Atlantic Corp. The deal will see shares traded at the rate of 0.8784 SBC shares for each SNET share, valuing each SNET share at $63.90, a premium of 8.0% over the current price of $59.1875. SNET will operate as a subsidiary of SBC, and the deal is expected to close by the end of 1998. As we went to press the first appeal for the merger to be blocked was put in by Republican Congressman Edward Markey, who accused SBC of reneging on promises made during the negotiation of the 1996 Telecoms Act.
