Blog Post

SBC, AT&T in Merger Talks?

AT&T has been subject of so many buyout rumors, that one worries to take it seriously. However since both, Wall Street Journal and New York Times are reporting the news, there might be some element of truth to it. (Meanwhile, SBC says it will slash 7000 jobs after it reported weaker earnings and increased wireline loss.) First, the deal specifics – SBC will buy AT&T for $16 billion, says The New York Times. The story describes talks as fluid and sensitive. The Times says that the talks could collapse, which is a way of saying this is not such a solid rumor.

Journal puts the price tag at $15 billion and reports that others like BellSouth could enter the bidding. As you might remember, BellSouth-AT&T marriage was highly rumored last year, but nothing came off it. Since then Ma Bell has become a leaner, if not a meaner operation. I still think SBC might be trying to pull off a bigger deal than just AT&T buy. I suspect they merge with BellSouth and scoop-up AT&T. It would instantly make them a big daddy of telecom.

A major acquisition would speak to SBC Chief Executive Edward Whitacre Jr.’s aim of turning the company into a national brand and his desire to do at least one final deal before he retires, according to people close to him. During the 16 years he has headed the company, Mr. Whitacre, 63 years old, has earned a reputation as a serial acquirer, building SBC from the smallest regional Bell into a telecom giant by acquiring fellow Bell companies Ameritech and Pacific Telesis. But SBC remains No. 2 behind Verizon Communications. [Wall Street Journal]

Now buying AT&T will make sense for anyone, and not just SBC. Why? Because AT&T still is the only game in the enterprise markets. MCI is still hurting and Sprint clearly wants to focus on wireless. That leaves AT&T in a pretty good shape. I wrote all this in my Business 2.0 column, predicting a massive wave of consolidation in 2005.