AT&T to Buy BellSouth in $67B Deal

AT&T Sunday announced a deal to acquire U.S. telecommunications operator BellSouth in an all-stock deal valued at US$67 billion.

The merger will mean faster development of IPTV (Internet Protocol TV) services for U.S. consumers, drawing on AT&T’s research and development work on IPTV and BellSouth’s existing fiber-optic networks for DSL and other broadband services, AT&T said. U.S. business customers will benefit from the combination of AT&T’s national and international networks with BellSouth’s local exchanges and broadband networks, it said.

Under terms of the agreement, BellSouth shareholders will receive 1.325 shares of AT&T common stock for each common share of BellSouth. Based on AT&T’s closing share price on March 3, the agreement equals $37.09 per BellSouth share, a 17.9 percent increase over the company’s closing share price on Friday.

The deal is expected to close within the next 12 months or so, subject to approval from regulators and the shareholders of both companies, according to AT&T.

As part of the deal, AT&T will gain sole ownership of U.S. mobile operator Cingular Wireless LLC, which is jointly owned by AT&T and BellSouth. AT&T intends to leave most of Cingular’s operations untouched, but said the merger would result in more efficient operations, including marketing.

After the merger, Cingular’s wireless services will be operated under the AT&T brand, it said.

The merger will generate substantial cost savings for the enlarged company, AT&T said. Within two years after completion of the merger, AT&T expects to see annual savings of more than US$2 billion from reduced operational costs, the consolidation of facilities, and combining the IT operations of the two companies.

AT&T said the merger did not change its financial outlook for the coming year. The company expects to see double-digit earnings per share (EPS) growth in each of the next three years. Total revenue, including Cingular, is expected to see growth again in 2007, one year earlier than forecast under guidance previously offered by the company.

Edward Whitacre, AT&T’s chairman and chief executive officer (CEO), will serve as chairman and CEO of the enlarged company, AT&T said. Duane Ackerman, the chairman and CEO of BellSouth, will serve as chairman and CEO of AT&T’s BellSouth operations during a transition period after the merger, it said.

Read ANALYSIS: AT&T and BellSouth for some perpective from Senior Writer Thomas Wailgum.

For related news coverage, read Cell Carriers Link Web to Cingular Mobiles and Group Calls for Net Neutrality Trade-Off.

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-Sumner Lemon, IDG News Service