NEW YORK-With a push from the new federal telecommunications deregulation law, SBC Communications Inc. and Pacific Telesis Group announced April 1 the first merger ever between two Baby Bells.
In this friendly takeover, SBC Communications Inc., based in San Antonio, Texas, has agreed to acquire Pacific Telesis Group, headquartered in San Francisco, for approximately $17 million. The new company will assume the SBC name, with Edward E. Whitacre Jr., SBC’s current chairman and chief executive officer, keeping the same post at the combined corporation. Phil Quigley, chairman and CEO of Pacific Telesis Group, will be second in command of the new company, holding the position of vice chairman of the board.
The combined company will offer products and services under some of the strongest brands in the industry-Cellular One, Pacific Bell, Southwestern Bell and Nevada Bell. It will be headquartered in San Antonio, although its cellular operations will be based in Dallas. Existing headquarter sites for Pacific Bell and Nevada Bell will be maintained.
The new corporation will serve the nation’s two most populous states, California and Texas, seven of the country’s 10 largest metropolitan areas and 16 of the top 50 markets. SBC and PacTel serve more than 30 million access lines in high-growth areas, and have access to over 80 million potential wireless customers across the country. The combined company said it is committed to creating 1,000 new jobs in California that would not have been created had the merger not occurred.
“This historic merger is about growth-in jobs, markets and services to our customers,” Whitacre said. “It is not about downsizings or reduced employment opportunities.”
Strategically, the merger is expected to create a telecommunications company with unparalleled focus on the growing Latin American and Asian markets. SBC’s businesses include interests in wireless companies in Asia, Latin America, Europe and South Africa. SBC’s relationship with Mexico and Latin America, and the Pacific Rim focus of Pacific Telesis will allow strong marketing to diverse populations in the combined company’s markets.
Upon completion, the merged company will have more than 100,000 employees, revenues of over $21 billion, operating cash flow of $9 billion and income of almost $3 billion. In terms of stock market value, it would be the nation’s second largest telecommunications company next to AT&T Corp.
The parties hope to complete the transaction, a tax-free stock-for-stock merger, by the end of the year. The merger must be approved by the California Public Utilities Commission, the U.S. Department of Justice and the Federal Communications Commission. While the Justice Department will focus on competition issues, the FCC must approve the transfer to SBC from PacTel of valuable licenses for personal communications and other radio services. Pacific Bell Mobile Services, a PacTel subsidiary, will offer PCS at the Republican National Convention in San Diego this summer, and will initiate commercial service by year end. The FCC must determine if the license transfers are in the public interest.
Because SBC and PacTel don’t compete in the wireless, local exchange or long-distance markets, the companies said they don’t see any antitrust or competitive issues in the mergers.
Except for a 3 percent stake that SBC owns in a cellular operator, the two Baby Bells don’t have any conflicts in wireless services, company executives said. Both SBC and PacTel have regional licenses for personal communications services.
Cellular has provided dramatic growth for SBC, which now serves 3.7 million customers and is the second-largest U.S.-based wireless communications company. SBC has been the strongest of the regional phone companies, due to the steady growth of the Sun Belt economy and to its cellular phone business.
PacTel, on the other hand, has been the weakest of the Baby Bells, in part due to its 1994 decision to spin off its cellular unit, AirTouch Communications Inc., to shareholders.
Since President Clinton signed the telecommunications reform bill into law Feb. 8, SBC has been making deals to combine cellular and long-distance services in 16 states outside its main territory of Arkansas, Kansas, Missouri, Oklahoma and Texas.
