This is a case of a baby eating its parent:
NEW YORK/PHILADELPHIA (Reuters) – SBC Communications Inc. on Monday said it will buy AT&T Corp. for about $16 billion, in a move to bolster its business with large companies and ending the independence of its former parent that for decades held a monopoly on the U.S. phone market.
The combined company would have around $71 billion in annual revenue, the same as the top U.S. telecoms company, Verizon Communications Inc., excluding SBC’s stake in Cingular Wireless.
A merger would likely face antitrust hurdles.
SBC’s acquisition of the No. 1 long-distance carrier will include $14.7 billion in SBC stock and a special cash dividend of roughly $1.04 billion to be paid by AT&T to its shareholders when the deal closes.
SBC will issue 0.78 of a share for each AT&T share, valuing AT&T at $18.41 a share. AT&T will then pay a special dividend of $1.30 a share. Combined, the deal would value AT&T at $19.71 a share — equal to its closing stock price on Friday.
The deal, which is expected to close by the first half of 2006, has already drawn criticism from analysts, who slammed the $16 billion purchase price as too much for a company with shrinking revenues and questionable growth prospects.
AT&T, whose history dates back 130 years to the invention of the telephone, has been slammed by increasing competition from SBC and other dominant local carriers in the long-distance market. AT&T’s market value and revenues peaked in 1999.
"AT&T’s business doesn’t seem that accretive or value added," said Greg Gorbatenko, an analyst with Marquis Investment Research.
AT&T last July withdrew from its traditional residential phone market, stung by government regulation and a changing marketplace as consumers turn increasingly to wireless services.
The GOOD NEWS (you can tell I’ve been reading Arthur Chrenkoff this morning) is that this means there’s one less telemarketer that’ll be calling up asking: "Can I please talk to the person who’s in charge of your telephone service?" (I’ve been tempted to say "ET isn’t here.")
Copyright 2005 The Moderate Voice