Baby Bells Ring Up $62B Merger
SBC Communications Inc., one of the telephone industry's most voracious acquirers, has agreed to purchase Baby Bell rival Ameritech Corp. for $62 billion in what would be the second-largest merger ever.
The deal would create a communications powerhouse with operations in nearly every region of the country from California to New England, is likely to serve as a potent rival to AT&T Corp., and to WorldCom Inc. after its pending $37 billion takeover of MCI Communications Corp.
"This is the creation of the first truly global competitor," Ameritech chief executive Richard Notebaert said today.
An SBC-Ameritech combination would give the combined company, to be known as SBC, 57 million phone lines, or nearly one-third of the nation's total. By comparison, Bell Atlantic, with operations along the East Coast, has 41 million phone lines.
The combination, if consummated, would be second only to the pending $82 billion merger of Travelers Group Inc. and Citicorp.
The $62 billion pricetag is based on SBC's closing stock price Friday .SBC's stock was down 6.8 percent, at $39.50 a share, late this morning on the New York Stock Exchange. Ameritech's stock was up 7.8 percent, to $47.34 a share.
The companies planned to expand beyond their combined 13-state region in a "national-local" strategy to sell local telephone service in the 50 largest U.S. phone markets.
Ameritech said it had received assurances no layoffs would occur among its nearly 70,000 employees worldwide, although some cellular operations would have to be sold to meet federal regulations. The companies expect to save at least $1 billion in expenses with the combination.
The Federal Communications Commission, which must approve the deal, had no immediate comment, but some consumer groups already had expressed opposition.
The deal is sure to invite close scrutiny, as SBC chief executive Edward E. Whitacre Jr. noted.
"Given the size and significance of the transaction we expect close scrutiny but ultimate approval from regulatory authorities," Whitacre said.
Whitacre stressed the combination would not be restoring the old Bell nationwide system that was broken up 14 years ago.
"This is no monopoly," he said. "Both our companies and the combined companies will have competition. Anything related to putting the Bell system back together is purely off-target."
The companies said Whitacre would remain as chairman and chief executive of SBC. Notebaert will remain as chairman and chief executive of Ameritech, at least until the merger is approved. The two sides said they have not worked out details of management structure after the merger.
Until now, Notebaert has appeared determined to remain independent, avoiding the combination frenzy of other Bells while aggressively purchasing large stakes in European phone companies.
But analysts have noted that Chicago-basd Ameritech appeared a ripe takeover target because of its solid Midwestern business and what some called its failure to move aggressively to compete under the new era of deregulation.
The parent of phone companies in Illinois, Indiana, Michigan, Ohio and Wisconsin, Ameritech also has moved aggressively into other non-core businesses such as cable television and its home-security business.
By CLIFF EDWARDS