NEW YORK-AT&T Corp., New York, announced it will acquire Teleport Communications Group in a stock swap transaction valued at about $12 billion, based on AT&T’s current stock price.
The acquisition is AT&T’s first big move into the local phone business since the breakup of Ma Bell’s monopoly in 1983. Teleport, headquartered in the New York City borough of Staten Island, is the largest competitive local exchange carrier in the country. It has networks in operation in 60 U.S. urban markets.
“The acquisition provides AT&T with an entry into the local phone market and will reduce its dependence on the regional Bell operating companies, with an eye toward bundling local with its long-distance, international and wireless services for customers,” Moody’s Investors Service said.
AT&T’s acquisition also provides a way out of the local telephone business for cable companies Tele-Communications Inc., Cox Enterprises Inc. and Comcast Corp., which have found the telephone industry to be costly. The companies together own nearly 67 percent of Teleport. The remaining shares are publicly held.
TCI and TCI Ventures Group, which holds 28.5 percent of Teleport, declared their strong support last week for the merger.
The three cable companies also hold interests with Sprint Corp. in Sprint Spectrum L.P., a nationwide provider of personal communications services that is in the midst of rolling out its markets using Code Division Multiple Access technology. The cable partners reportedly have wanted out of the partnership for about a year. The rollout phase hasn’t given them a return on their investment and competition from satellite providers in the cable industry has caused them to refocus on their core businesses, say analysts.
Sprint reportedly is intensifying its search for a European partner to construct a possible merger or partnership scheme.
