The decision followed late-night meetings by directors of SBC, the nation's second-biggest regional phone company, and the 120-year-old icon AT&T, which gave birth to SBC when its monopoly was broken up in 1984.
SBC spokesman Larry Solomon said documents in the acquisition were signed early Monday after AT&T's board of directors approved the deal. Board members of SBC approved the transaction on Sunday evening.
The acquisition is still subject to regulatory and shareholder approvals, but the companies expected to close it by the first half of 2006.
San Antonio-based SBC has about 50 million local-telephone customers, mostly in the Midwest and South. It also is a 60 percent owner of Cingular Wireless, which serves more than 46 million wireless customers.
AT&T handled the nation's telephone calls before it was broken apart 21 years ago. The Bedminster, N.J.-based company has 24 million long-distance customers.
In their latest earnings reports for 2004, SBC reported $40.5 billion in revenue while AT&T reported $30.54 billion. The combined revenue total of $71.04 billion would still fall short of the $71.28 billion reported for 2004 by Verizon Communications Inc., the nation's biggest phone company.
"Today's agreement is a huge step forward in our efforts to build a company that will lead an American communications revolution in the 21st century," Edward E. Whitacre Jr., SBC chairman and chief executive, said in a statement.
"We are combining AT&T's national and global networks and expertise with SBC's strong platforms and skills in local exchange service, wireless and broadband," he added. "It's a great combination."
Shareholders of AT&T, under terms of the agreement, will receive total consideration currently valued at $19.71 per share, or about $16 billion. From SBC, AT&T shareholders will receive 0.77942 shares of the Texas company's common stock for each AT&T common share, in an exchange ratio equaling $18.41 per share based on SBC's closing stock price on Jan. 28, 2005. That amounts to about $15 billion in stock, Solomon said.
Additionally, AT&T will pay its shareholders a special dividend of $1.30 per share at the time of closing, totaling about $1 billion. The stock consideration in the transaction was expected to be tax-free to AT&T shareholders.
"The combination of these two strong, complementary companies will ensure that together we will have all the capabilities necessary to compete successfully in serving a broad range of customers across the country and around the globe," David W. Dorman, AT&T chairman and chief executive, said in a statement.
"Together, SBC and AT&T will be a stronger U.S.-based global competitor capable of delivering the advanced network technologies necessary to offer integrated, high-quality and competitively priced communications services to meet the evolving needs of customers worldwide," said Dorman.
Edward E. Whitacre Jr., SBC chairman and chief executive officer, will serve as chairman, CEO and as a member of the Board of Directors of the new company. Dorman will serve as president and as a member of the Board of Directors.
The corporate headquarters for the combined company will remain in San Antonio.
With regard to the company name, Whitacre said, "We value the heritage and strength of the AT&T brand, which is one of the most widely recognized and respected names throughout the world, and it will certainly be a part of the new company's future."
In 1984, AT&T settled a Justice Department lawsuit by agreeing to spin off the regional Bells, companies known today as SBC, BellSouth Corp., Verizon Communications Inc. and Qwest Communications International Inc.