NEW YORK-In a most serious transaction notwithstanding its April 1 announcement date, SBC Communications Inc. became the proud parent of Pacific Telesis Group in a $16.5 billion merger said to be the third largest in U.S. history.
The merger creates the second largest telecommunications company in the country, according to SBC, with more than 31.4 million access lines, of which 16.4 million belong to PacTel, and a wireless territory covering a population of 87 million, of which SBC accounts for 53 million pops. SBC and Pacific Telesis reported combined 1996 revenues of $23.5 billion.
Besides long-distance and local wireline voice communications, the new company offers wireless telephony, paging and messaging services, Internet access, cable television service, telecommunications equipment and directory advertising and publishing.
“Exploding demand for Internet access and high-speed data services, strong growth in wireless services, increased demand for basic wireline service and tremendous opportunities in long-distance and in markets outside the United States-all point to an exciting future for the new SBC,” said Edward E. Whitacre, Jr., chairman and chief executive officer.
SBC’s proven strength in product development, marketing and sales, and solid international investments, complement Pacific Telesis’ efficiency in process management and cost containment, Whitacre said.
“The merger better positions SBC to be the telecommunications provider of choice at a time when all markets are opening to competition,” said Phil Quigley, vice chairman of SBC.
The transaction is a tax-free, stock-for-stock merger. The exchange ratio will give shareholders of the San Francisco-based Pacific Telesis 0.73 shares of SBC common stock for each of their shares. After the exchange, the combined company will have 912 million outstanding shares, of which 66 percent will be owned by SBC shareholders and 34 percent by PacTel shareholders. Based on SBC’s closing stock price March 31, the equity value of the new company is $47.9 billion.
The merger cleared its last regulatory hurdle March 31 when the California Public Utilities Commission voted its approval. Apparently retreating from recommendations of state administrative law judges, the PUC ordered the combined company to rebate $248 million over five years to its California customers.
In late February, the judicial panel had recommended the PUC require Pacific Telesis to rebate at least $590 million, or half their forecasted economic benefits for the combined companies, to PacTel rate payers as a condition for merger approval. At that time, PacTel said it would ask the commission to lower to $200 million the amount of savings to be shared with consumers.
With Pacific Telesis Group now a subsidiary, the new company will retain the SBC name and SBC corporate headquarters in San Antonio, Texas. The combined company will have nearly 100,000 employees.
SBC has modified its logo to incorporate the star burst from the Pacific Telesis Group logo. The new SBC will continue to use the Pacific Bell and Nevada Bell brands in California and Nevada; the Southwestern Bell brand in Arkansas, Kansas, Missouri, Texas and Oklahoma; the Cellular One brand in the cities of Baltimore and Washington and in Illinois, Massachusetts and New York.
