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<DIV><FONT face=Tahoma><FONT size=2><SPAN class=090193815-27012005><FONT
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<DIV><FONT face=Tahoma><FONT size=2><SPAN class=090193815-27012005><FONT
face=Arial color=#0000ff>FYI </FONT></SPAN></FONT></FONT></DIV>
<DIV><FONT face=Arial color=#0000ff size=2></FONT><BR><B>January 27,
2005<BR><BR><BR></B></DIV>
<BLOCKQUOTE dir=ltr style="MARGIN-RIGHT: 0px">
<H2><B>SBC Said to Be in Talks to Buy AT&T</B></H2><FONT size=2><B>By
ANDREW ROSS SORKIN and KEN BELSON <BR><BR></B></FONT><A
href="http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=SBC">SB</A><A
href="http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=SBC">C
Communications</A>, the second-largest regional phone company in the nation,
is in talks to buy AT&T for more than $16 billion, according to executives
close to the negotiations. <BR><BR>A deal, if reached, would be the final
chapter in the 120-year history of AT&T, the first technological giant of
the modern age and the original model for telecommunications companies
worldwide. A deal would be a reunion of sorts, putting back together some of
the largest pieces of the Ma Bell telephone monopoly, which was broken up in
1984. <BR><BR>The talks, which the executives described as "fluid" and "very,
very sensitive" would unite SBC, a Baby Bell with some 50 million local-line
customers, with AT&T, its much-diminished former parent.<BR><BR>AT&T,
which only two decades ago ranked among the nation's very largest companies,
is a shadow of its former self, focusing almost exclusively on corporate
customers. Last year, AT&T said it would no longer market itself to its
traditional retail customers.<BR><BR>Still, the executives cautioned that the
talks could very well collapse. Indeed, AT&T has been in talks before. In
2003, negotiations between the company and <A
href="http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=BLS">BellSouth</A>
fell apart at an advanced stage when BellSouth saw how weak AT&T's
prospects were. The executives involved in the current talks said that many
issues, including a final price, had yet to be resolved. <BR><BR>Spokesmen for
the two companies declined to comment. <BR><BR>The talks come as the
telecommunications landscape has shifted from traditional fixed-line service
to faster-growing, higher-margin businesses like wireless, broadband and
corporate services. And with pricing wars continuing, telecommunications
companies are looking to merge or risk being put out of business. <BR><BR>In
theory, SBC and AT&T have complementary technology. SBC has a strong
presence in California, Texas and Illinois, although, as with all the Bell
companies, its fixed-line business has slid as customers use their cellphones
more.<BR><BR>SBC has also made a strong push to sell broadband lines to
consumers and is expanding its fiber optic network to provide video services
in the coming year or two. The company also resells satellite television
service from the DISH Network.<BR><BR>AT&T, on the other hand, has the
largest international fiber network and the deepest client list of major
corporations, which are considered valuable because they buy services in bulk.
AT&T is also a major provider to the government and to companies that
operate globally.<BR><BR>While SBC continues to grow slowly thanks to demand
for its high-speed Internet lines, AT&T's business is expected to shrink
about 15 percent this year. It is trapped in a vicious price war with its main
rival, <A
href="http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=MCIP">MCI</A>.
<A
href="http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=VZ">Verizon
Communications</A>, the largest regional Bell company, and SBC have also
started marketing heavily to small businesses.<BR><BR>Regulators would be
unlikely to block a merger given AT&T's diminished role in the industry.
The company suffered a setback last year when the Bells won the right to raise
fees they charge companies like AT&T for access to their local networks.
One result of that was the decision last July to no longer market local phone
service to residential consumers. AT&T now has about 25 million
residential customers and about 3 million corporate customers<BR><BR>Despite
its woes, AT&T has worked hard to cut costs, reduce debts and write down
the value of its assets. The moves have made the company, even with its
problems, more attractive to companies in search of the big corporate clients
that AT&T has.<BR><BR>In the fourth quarter, AT&T's profit rose 84
percent, to $625 million, beating Wall Street's estimates. The jump came
mostly because of cost-cutting efforts, including a 23 percent reduction of
its work force last year.<BR><BR>SBC reported its fourth-quarter results
yesterday, saying its sales rose as profits fell in its fourth
quarter<BR><BR>SBC, based in San Antonio, said it earned 23 cents a share in
the quarter ended Dec. 31. The company said that figure would have been 34
cents if not for one-time costs, including severance payments and expenses
from the $41 billion acquisition of AT&T Wireless by its Cingular Wireless
venture. <BR><BR>In the period a year ago, SBC earned 27 cents a
share.<BR><BR>SBC said its fourth-quarter operating revenue was $10.3 billion,
compared with $10 billion a year ago. It attributed the growth to the addition
of 425,000 high-speed Internet lines and a considerable slowdown in the
erosion of its traditional telephone business. Edward E. Whitacre Jr., SBC's
chief executive, has said repeatedly that he is more focused on dealing with
Cingular, which it owns with BellSouth.<BR><BR>Mr. Whitacre, like his
counterpart at BellSouth, Duane Ackerman, are known for their cautious
approach to investing and prudent use of their companies' money.
<BR><BR>Still, according to industry analysts, AT&T's chief executive,
David W. Dorman, has been eager to sell the company and perhaps, with the
company now leaner, he may have found a buyer.<BR></BLOCKQUOTE></BODY></HTML>