The telecommunications world has changed so much – and become so much more competitive – since AT&T Corp spun off the Bell System as seven regional Baby Bells that no-one raises an eyebrow at the idea that some of those Bells might start putting the system back together again by merging. Earlier this year, Nynex Corp and Bell Atlantic Corp confirmed that they were looking at the idea of marriage, but yesterday, two Bells from the other side of the country beat them to the punch. There was a time when Southwestern Bell Corp, whose territory covers a vast swathe from St Louis south and west to embrace Texas, was regarded as the most boring of the seven Bells. These days, it is called SBC Communications Inc and has a new image to go with the new name. Yesterday it bit back by announcing an agreed bid for the most embattled of the Bells, Pacific Telesis Group Inc, which has spent the 13 years since spin-off arguing with the consumerist California legislature. Pacific Telesis is much the smallest of the Bells these days because it felt constrained to spin off its cellular business as AirTouch Communications Inc last year to free it from the dead hand of the regulator. Pacific Telesis also serves the – (in population terms) – tiny state of Nevada; SBC, based in San Antonio, Texas these days, serves Texas, Missouri, Oklahoma, Arkansas and Kansas; the combination would create a local telephone company with 25m customers and $25,000m in combined annual revenues. PacTel is currently valued at about $12,000m in the market, a far cry from SBC’s valuation of about $32,000m. Having divested AirTouch, Pacific Telesis has paid $700m for Personal Communications Services licenses across California but needs capital to build the network. SBC now has more than 3m cellular customers in the US and a market penetration that is double the industry average. The share exchange deal, in which SBC proposes to pay 0.733 of its own shares for each Pacific Telesis out, values the latter at $16,550m. The combined company, second largest US telecommunications company by market capitalization, will be known as SBC Communications Inc. It will offer its various services under the Southwestern Bell, Pacific Bell, Cellular One and Nevada Bell names.
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