[Hen] RE: "SBC Said to Be in Talks to Buy AT&T" - NY Times

[Johnson, Bill]

HEN: 
 
FYI 

January 27, 2005





	SBC Said to Be in Talks to Buy AT&T

	By ANDREW ROSS SORKIN and KEN BELSON 
	
	SB
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://cust
om.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=SBC> C
Communications
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://cust
om.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=SBC> ,
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. 
	
	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. 
	
	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.
	
	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.
	
	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 BellSouth
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://cust
om.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=BLS>
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. 
	
	Spokesmen for the two companies declined to comment. 
	
	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. 
	
	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.
	
	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.
	
	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.
	
	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, MCI
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://cust
om.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=MCIP> .
Verizon Communications
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://cust
om.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=VZ> , the
largest regional Bell company, and SBC have also started marketing
heavily to small businesses.
	
	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
	
	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.
	
	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.
	
	SBC reported its fourth-quarter results yesterday, saying its
sales rose as profits fell in its fourth quarter
	
	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. 
	
	In the period a year ago, SBC earned 27 cents a share.
	
	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.
	
	Mr. Whitacre, like his counterpart at BellSouth, Duane Ackerman,
are known for their cautious approach to investing and prudent use of
their companies' money. 
	
	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.
	

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