The New York Times’ Ken Belson has a colorful back-story on the AT&T-BellSouth merger and the bottom-line is this: some birds had to die for this merger to become a reality. Belson’s piece points out that the merger talks between AT&T and BellSouth, which actually began even before SBC sealed its deal to buy AT&T, were revived on a hunting trip that AT&T CEO Ed Whitacre and BellSouth CEO Duane Ackerman took in January.
When SBC absorbed AT&T in November, Mr. Whitacre turned once again to BellSouth because, among other reasons, the two companies were having trouble managing Cingular. In mid-January, Mr. Whitacre sent one of his bankers, Roger Altman, who worked in the Treasury Department under President Clinton, to approach Mr. Ackerman again and make an informal proposal. The next day, Mr. Whitacre and Mr. Ackerman went bird hunting, these people said. After their day out, the men promised to go to their boards and pursue a deal.
Another juicy tidbit from Belson’s piece: Ackerman and his lieutenants stand to gain some big pay-outs from the deal.
With the deal, Duane Ackerman, the chairman of BellSouth, and several of his top lieutenants stand to collect hefty special payments, according to the terms of their employment contracts. Mr. Ackerman, who 63 years old and nearing retirement, could sell $28,374,000 worth of restricted stock and options if he is asked to leave the company, according to publicly filed documents.
By some corporate standards, $28 million is not a big pay-out. Still, without this merger, BellSouth faced an uphill struggle to find growth and continued profitability — the executive team and the company itself seem to come out winners from the deal.
Posted by Cynthia Brumfield at 11:45 PM | Print | Comments (0)
Given the flood of news stories and blog items today, AT&T and BellSouth went public with their merger deal. Under the deal, valued at $67 billion based on Friday’s closing prices, shareholders of BellSouth will receive 1.325 shares of AT&T common stock for each common share of BellSouth.
The companies hailed the merger as a cost-savings combination with “synergies” that exceed $2 billion on an annual basis and reflect a net present value of nearly $18 billion.
The new combined company will be headed by AT&T CEO and deal architect Ed Whitacre, although BellSouth CEO Duane Ackerman will stay on during a transition period. Three members of BellSouth’s board will join the board of the new company, which will be headquartered in San Antonio, TX, where AT&T is currently headquartered.
AT&T clearly has cable competition in its sites. The press release announcing the deal proclaimed
Consumers seeking a real alternative to cable monopolies should see faster and more economical deployment of next-generation IP television networks and similar services as a result of AT&T’s groundbreaking entry into IPTV and the unparalleled research and development work at AT&T Labs, coupled with BellSouth’s extensive deployment of fiber networks for DSL and other broadband services.
It’s clear that the two companies don’t expect any serious antitrust objections, or at least the public posture is that there won’t be any serious government obstacles to the merger. According to the press release
Since AT&T and BellSouth are not actual competitors in the local, long distance and video markets, and because BellSouth is not a significant competitor with AT&T in the enterprise market, the merger will not reduce competition in any of those markets.
While the headlines proclaim the merger to be a combination of two companies, in fact the deal will merge three companies — AT&T, BellSouth and the nation’s top mobile voice provider, Cingular, which is jointly owned by AT&T and BellSouth.
Posted by Cynthia Brumfield at 4:23 PM | Print | Comments (0)Jeff Jarvis offers a provocative response to the news that AT&T is negotiating a $65 bil. acquisition of BellSouth. His post seems worthy of a thoughtful read, whether you agree with him or not. Time will tell the extent to which he’s right or wrong.
[C]onsolidation these days — when small is the new big — is about dinosaurs huddling against the cold, about Gulliver losing out to all those damned Lilliputans. Distribution is not king; in fact, it’s a rotten business. Content is not king; hear the whining from that end of the world. The scarcity economy is over. Openness kills monopolies. Don’t congratulate AT&T. Pity them.
The new, small companies do to some extent, for now, succeed on the backs of the big companies — pointing to their reporting, using their wires. But the big, old companies just don’t understand that the new, small companies really succeed not because they piggyback but because they empower.
Oh, the big, old companies will still reflexively try to get in the way. That’s all they know how to do. They will try to restrict what we can do on “their” wires with “their” information. They will try to recruit stupid government regulators to conspire and help them. We, the people, have to think five steps ahead of them and organize all our little pieces of ropes and pegs to tie them down. But we will. It’s inevitable.
The last huge merger in telecom…is the best indication that the telecom giants are falling. Thanks to Apple and TiVo giving entertainment addresses we can get to around the one official wire into our homes, expect the same to happen with the cable business. When I said that in the hall at OPA [Online Publishers Association], some folks protested that cable still has good cash flow. But I replied, beware the cash cow in the coal mine. There’s no growth there. And thanks to no end of empowering tools…the media companies that tried to get in the way between us and information and each other will also consolidate and then shrink unless they learn to empower us. We are witnessing the supernova of bigness.Posted by Mitch Shapiro at 3:47 PM | Print | Comments (0)
The Wall Street Journal is reporting that AT&T is going to buy BellSouth for $65 billion, a mega-merger that would radically change the nature of communications competition in the U.S. The deal, purportedly slated for announcement as early as Monday, would make AT&T the largest communications company in the U.S., and possibly the world.
The acquisition of BellSouth would give AT&T — a telecommunications giant already following SBC’s acquisition of AT&T — the biggest broadband footprint in the world and a wireline voice market share that far surpasses half of all homes in the U.S. At the end of 2005, the two companies served a combined broadband customer base of nearly 10 million, more than the current top-ranked broadband provider Comcast, which served 8.5 million broadband subscribers at the end of 2005. (more after table)
| AT&T and Bell South Key Statistics | |||
| Q4 05 in mil. | |||
| AT&T | BellSouth | Combined | |
| Total Access Lines | 49.4 | 20 | 69.4 |
| Total DSL Subs. | 6.92 | 2.89 | 9.81 |
As the table also shows, the two companies had a combined access line count of 69.4 million at the end of 2005, far larger than Verizon’s 48.8 million. A combined AT&T-BellSouth would push Verizon to a distant second in domestic telecom reach. According to the Journal, AT&T and BellSouth have a combined market cap of $150 billion, over 50% greater than Verizon.
Finally, a combined AT&T-BellSouth would place wireless voice leader Cingular fully under AT&T’s control. Cingular, which served 54.1 million voice customers at the end of 2005, is currently a joint venture between the two telcos.
The Journal piece contains this puzzling assertion about the combination:
[I]t would effectively validate the vision of competition laid out by the government — one in which traditional telecom firms compete directly against cable operators rather than against each other.
I’m not sure what government vision this refers to (1996 Telecom Act?), but it is clear that some parts of the government, namely the antitrust authorities, might look askance at the deal given the stepped-up concentration in wireline telephony, among other characteristics of the combination.
And you can bet that cable operators, communications workers, Internet content and applications providers and a host of other affected parties are going to come out swinging once the deal is finally announced.
Update: Reuters is reporting that the deal is expected to be announced today, Sunday March 5.
Posted by Cynthia Brumfield at 12:58 AM | Print | Comments (0)
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