Cingular, AT&T Wireless Connect
Cingular Wireless, the nation's No. 2 mobile phone provider, has agreed to acquire third-largest AT&T Wireless for more than $40 billion, a deal that could create the nation's largest cellular subscription base, the company announced Tuesday.
The deal, confirmed after the British company Vodafone Group PLC said it had withdrawn from the two-way bidding war, creates a combined company with a potential 46 million subscribers, Cingular said Tuesday in announcing the agreement.
The current market leader, Verizon Wireless, reported 37.5 million subscribers in its quarterly earnings report last month.
"This is great news for America's wireless users," said Stan Sigman, president and CEO of Atlanta-based Cingular in confirming his company's winning bid, which is subject to the approval of AT&T Wireless shareholders and federal regulatory authorities.
Cingular, a joint venture between SBC Communications Inc. and BellSouth, said its winning offer was $15 a share, or about $41 billion. San Antonio-based SBC is the nation's second-largest local phone provider.
"At $15 dollars a share, it shows you just how exciting the bidding got," Morten Singleton, an industry analyst at Williams de Broe in London, told CBS MarketWatch.
The deal values AT&TW at 9.9 times its underlying earnings in 2005, which is currently higher than what the market has valued each of AT&TW's European peers.
"This combination is expected to create customer benefits and growth prospects neither company could have achieved on its own and will mean better coverage, improved reliability, enhanced call quality and a wide array of new and innovative services for consumers," Sigman said.
John D. Zeglis, AT&T Wireless Chairman and CEO, said in a statement that the transaction means "a handsome return" for investors, advantages for customers and more opportunities for employees.
The deal brought to an end a heated bidding war that saw both companies boosting their offers to stay in the running.
Cingular, which currently has 23.4 million customers, opened its bidding at $13 a share, or $35 billion, over the weekend, two sources told The Associated Press on condition of anonymity. It then upped its offer to $14 a share for the Redmond, Washington-based AT&T Wireless early Monday; Vodafone matched Cingular's offers in each stage of the process, a source said.
A Vodafone deal would have required the British cell phone giant to sell its 45 percent stake in Verizon. The British company's shareholders also feared it would overpay for AT&T Wireless, reports CBS News Correspondent Steve Holt.
After announcing it had dropped out, Vodafone said Tuesday that it remained "committed to its existing position in the U.S. market with its successful partnership in Verizon Wireless."
Vodafone shareholders "need to closely examine the U.S. strategy now but — and it's a significant but — the 45 percent stake in Verizon Wireless must be worth more than it was before this bidding began," Christian Maher, analyst at Investec Securities in London told CBS MarketWatch, as the U.S. competition goes from six companies to five.
In Paris, shares in Vivendi Universal SA rose 4.5 percent in early trading on speculation that Vodafone would now turn its attention to the French company, hoping to gain control of SFR-Cegetel.
AT&T Wireless' share price has risen steadily in recent weeks on news that it was putting itself on the auction block. The carrier has more than 22 million subscribers, including a sizable base of corporate clients who tend to use more services and spend more money.
But the company has struggled in recent months.
Late last year, it couldn't add new subscribers because of a glitch in a new software system. The company also has acknowledged that it has lost more customers than it had gained under the new federal rules that took effect in late November allowing cell phone users to change carriers without losing their phone numbers. The company has not released specific figures.