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Baby Bell swallows Mama Bell, SBC buyout AT&T
by : Darya Zarin
Date : Wed, 02 Feb 2005 00:00:00 GMT
Yesterday’s Phone Company which had practically wired all of the US of A, is about to be bought over by offshoot SBC Communications. lt;br / gt;
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AT amp;T chief William M. Ellinghaus who had joined the local Bell Company as a line worker in 1940, said he was particularly happy with the merger decision, “If the breakup of AT amp;T in 1984 was a sad day in the history of AT amp;T, then this is perhaps the happiest day.” lt;br / gt;
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“Instead of feeling humbled by the event, I feel optimistic because the merger would create another behemoth the size of yesteryears’ Phone Company.” he said referring to the historical Bell Telephone Company started by Alexander Graham Bell 128 years ago. lt;br / gt;
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The deal would cost SBC Communications $16 billion and would be executed by an exchange of $15 billion in stock and $1 billion by way of dividend payments to AT amp;T shareholders. lt;br / gt;
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The merger would span out over a year and, like Ellinghaus says, would create a telecommunications juggernaut with more than $70 billion in annual revenue. lt;br / gt;
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It also marks the reunion of SBC with its parent company after 21 years. Readers will remember the 1984 decision by the Justice of an antitrust case against AT amp;T. lt;br / gt;
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Until 1984, AT amp;T had virtually enjoyed a monopoly on phone services. The company operated 98 percent of all long-distance U.S. phone lines and made 90 percent of all phone equipment. This rankled upstart phone companies such as MCI which complained to the government that AT amp;T was crushing would-be service providers. lt;br / gt;
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The Justice Department agreed and initiated action against the Bell system. The company, certain of defeat in the case, decided to hive off its monopoly elements – the Bell operating companies. It decided to focus instead on the lucrative long distance business. lt;br / gt;
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The separated entities were formed into seven regional operating companies, commonly known as the Baby Bells, of which SBC Communications is one. The parent group was confident that these companies would survive. Little did they expect that it was the parent company that would be sinking. lt;br / gt;
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AT amp;T had to struggle to find a revenue stream to supplement long-distance, which quickly became a commodity subject to vicious price wars. Its ventures into cable and wireless both met with failure. lt;br / gt;
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The surviving Bells, as the offshoot are known, have been doing rather well over the years. SBC itself is the merger of three Baby Bells. The other companies are Verizon Communications Inc. and BellSouth Corp. lt;br / gt;
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SBC had a profitable mix of services under its wings, voice, data and video services, on the strength of which it grew to its present stature. lt;br / gt;
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The merger deal must be approved by AT amp;T shareholders, and must also receive the green signal from federal and international regulators. lt;br / gt;
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The name of the new entity is not announced yet. lt;br / gt;
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The merger will lead to the SBC cutting close to 13,000 jobs. lt;br / gt;
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