Update: AT&T, BellSouth confirm the merger. “This merger is a logical next step that creates substantial value for customers and stockholders of both AT&T and BellSouth,” said AT&T Chairman and CEO Edward E. Whitacre Jr in a statement. “It will benefit customers through new services and […]

Update: AT&T, BellSouth confirm the merger. “This merger is a logical next step that creates substantial value for customers and stockholders of both AT&T and BellSouth,” said AT&T Chairman and CEO Edward E. Whitacre Jr in a statement. “It will benefit customers through new services and expanded service capabilities. It will strengthen Cingular through unified ownership and a single brand.” In other words, Cingular will soon be back as “AT&T Wireless.”

Mr. Whitacre will serve as chairman, CEO and a member of the board of directors of the combined company. Mr. Ackerman will serve as chairman and CEO of BellSouth operations for a transition period following the merger. Additionally, three members of BellSouth’s board of directors will join the AT&T board. The corporate headquarters for the combined company will remain in San Antonio. Cingular’s headquarters will remain in Atlanta, as will the combined company’s Southeast regional telephone company headquarters.

The merger will likely get a lot of opposition from the consumer groups. Gigi B. Sohn, president of Public Knowledge, in a statement today noted that, we need to make sure that Net Neutrality is part of the approval process. “Both AT&T and BellSouth have been forthright in their statements about their desire to exert greater control over the Internet. It is up to those who make public policy to make certain that the principles of an open Internet continue through this greater consolidation of the telecommunications industry. It is vitally important that the Internet remains open and accessible to consumers and to service providers and remains the source of innovation it has been over the past two decades.”

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Ben Silverman, a telecom analyst with independent investment newsletter FindProfit.com says that, “The deal will raise fears that Verizon is left with no option but to acquire Qwest, causing further regulatory issues. Qwest will need to find a suitor, which could include Verizon or Sprint’s new local unit, Embarq. Valor Communications, which acquired Alltel’s landline business, could also be a suitor. An AT&T-BellSouth deal would put pressure on Verizon to acquire the 45% stake of Verizon Wireless that Vodafone owns. Vodafone has already said that it is in talks to sell its Japan unit, meaning that the company now has even more leverage over Verizon to extract a serious premium for its stake in Verizon Wireless. “

Meanwhile Kirsten Osolind thinks King Ed rules.

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Holy smokes…. King Ed (Whitacre) is really going to be the king of telecom. The Wall Street Journal is reporting that AT&T is in talks to buy BellSouth for about $65 billion. The news should not surprise anyone, since it was a foregone conclusion that BellSouth would eventually end-up with SBC/AT&T. The prime driver behind this deal has to be Cingular, the wireless joint venture between the two companies which has become an awesome money machine.

Put together, the SBC territory would extend from California to Florida, north to Illinois and south to Texas. Combining the two companies’ current market capitalizations, AT&T would have a market value approaching $150 billion, over 50% greater than Verizon.

This basically makes it Verizon versus AT&T in the US telecom space. So its pretty much back to the future. I think this could prompt another round of mergers. Qwest and Sprint Local could make good partners. Of course, Verizon could make some moves of its own, and snap-up someone like Alltel.

The wave of mergers has dramatically reshaped the telecom industry, and a purchase of BellSouth would further cement the recreation of the old Ma Bell, which the government pushed to break up in 1984. The management of AT&T, which has apparently briefed key senior government officials late last week, appears to be betting that the Bush administration and a Bell-friendly Federal Communications Commission won’t raise too many obstacles for such a deal.

Bell-Friendly is a euphemism for ‘FCC does whatever bells ask them to do.’ The long term implications of this deal, and its impact on the whole network neutrality debate is going to be huge. I wonder how it will impact the broadband prices. I have not had a chance to fully digest this information, but will update the post, in the morning.

  1. Oh, like this REALLY comes as a big surprise?

    This is just what may have happened in 1997 when SBC wanted to buy AT&T and BellSouth was in the mix then and in 2001 dropped it.

    So the question is, what is different now than in 1997 and 2001, as to let these mergers go through when back then it was not approved?

    Do you really think AT&T divestures of its cable and wireless units were not a grand plan to make the future mergers

    This was a setup in the making for many years, in just that the 1997 attempt to merge was a “test” to see who were friends or foes in Washington. When they found the foes, they bought their friends in the next election.

    SBC/AT&T 1997

    AT&T and BellSouth – 2001

  2. It will be interesting to see what happens when the FCC begins reviewing the reported and alleged merger of the AT&T/BellSouth deal. As it may be a much different Commission body with the hopes of Robert McDowell’s confirmation by the Senate.

    Mr. McDowell is a telecom lawyer who currently serves as assistant general counsel at Comptel and opponent of the AT&T and Verizon mergers last year. Mr. McDowell is scheduled to appear before a Senate committee on Thursday for his confirmation and is likely to be asked aboutthe merger.

    It will be also interesting to see how Chairman Martin handles Mr. McDowell. Although he is a Republican, his nomination to the FCC was not welcomed bythe Bell companies. Martin may have a tougher go at it this time without having any leverage over Commissioner Copps’ job to hang over his head and Commissioner Adelstein losing an ally. Perhaps Martin’s whipping days are numbered in making partisan rulings?

    As you may remember, Commissioner Copps’ reappointment was still in the air when the FCC pushed the SBC/AT&T – Verizon/MCI mergers through, with really no enforceable conditions. Both Copps and Adelstein where in a tough position when they gave in the on DSL changes in hopes of getting tougher conditions on the pending mergers.

    Well that backfired, and hopefully with jobs secured for a while and a potential ally in the making, they may be willing to push Martin’s back against the wall. It will also be interesting to see what newly appointed Commissioner Deborah Tate will swing on this.

  3. I wish I was a Telecom LAWYER cause you could have billable hours for decades to come…where does this leave Level3, Broadwing, Qwest, and Sprint??????? Is this truly the RBOC vs the CABLE Hatfield /McCoy ole west gunfight shootout?????????? Level3 has ALL six MAJOR CABLES as major customers…how and WHO switches those IP based calls from cable voip onto RBOC dominated ATT telco space?????

  4. Level3 shags WilTel and Progress Telecom…Qwest alone at the altar holding some nasty debt…Broadwing on Cramer Steroids…Sprint a lonely bridesmaid always a bridesmaid…any BETS out there who shags whom NEXT????????? HINT:::: Level3 JUST raised another 400 Million when they still have another Billion in cash and the ”Fat Lady”’ has NOT sung soprano as of yet!@

  5. I just want to nit-pick the WSJ article. If they’re going to try to wow people by drooling over the expansive SBC/ATT/Bell South territory, they should get their geography correct. Wisconsin and Michigan are old school Ameritech/SBC/ATT states and are further north than Illinois last time I checked.

  6. Bells, bells, bells… charge me some more fees and charge me to get them off my bills, bills, bills!

    I’m elated.

  7. Jose Figueredo Sunday, March 5, 2006

    I wonder if Verizon is going to stay on the sidelines and watch the world go by…I am not happy to see this deal, neither one of these two companies have innovation on their plans.

  8. Will Packet 8 lose their Bellsouth business? Has DeltaThree lost their SBC business?

  9. I can’t stress this one enough: divestiture has cost the American people billions since 1984. I believe the quote above by Frank Muto – WBIA was: “how and WHO switches those IP based calls from cable voip onto RBOC dominated ATT telco space?????” No kidding. AT&T’s “one policy, one system, universal service” brought Americans a low cost telecommunications network that was the most reliable in the world. The government replaced it with a handful of companies that barely know how to work together.

    “I am not happy to see this deal, neither one of these two companies have innovation on their plans.” Rick…Bell gave us the telephone, the transistor (solid state electronics), etc and would have kept innovating if it weren’t for government intervention barring it from entering other markets outside of telecom (1956). The government in the same time span gave us double digit inflation, double digit unemployment, the Vietnam war, the Korean War, both World Wars, and the Spanish American War. The government thought it had the right to tell AT&T how to operate its business? Let me tell you something about the Bell Monopoly: When Bell tried to lower its prices, it was called out as being noncompetitive because it was pricing itself out of the competition. I’d rather have a company that can offer lower cost combined with great service.

    Remember as well that BellSouth owns the Bell logo that AT&T had to give up in 1984. Maybe we’ll see a return back to the glory days after all…Bell Wireless instead of Cingular Wireless? I, too, am elated. This is a victory over government regulators who broke up the largest company in the history of mankind.

  10. May I offer a little gal’s thought with great respect to you, Om?

    Bellsouth and SBC have been partnering for years on projects. In my mind, the historical fission of Bell companies was merely “on the books.” Take for instance the consolidation of CABS (carrier access billing) and negotiation of billing cycle agreements with long distance carriers, resolving millions of dollars in account discrepancies. And ALECs/CLECs? BellSouth served as first-mover and mentor to SBC teams — sharing best practices and innovation. Whoever believes Ackerman and Whitacre don’t have accelerating innovation on their minds has seriously been quaffing ale with gusto. They practically consider themselves family members.

    Ackerman too has been calling for a change in policy for years –because telecom regulation constrained innovation in the marketplace, made it difficult for Bell companies to invest in new technologies (particularly in rural areas), and slowed the delivery of new services to all customers.



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