AT&T to be Acquired by SBC Communications

AT&T, once the standard bearer of the U.S. communications industry and a top employer in New Jersey is to be acquired for $16 billion by SBC Communications, the San Antonio-based communications company that traces its roots back to a number of the regional Bell operating companies that were once

part of the Ma Bell system. The transaction combines AT&T's national and global systems capabilities, business and government customers, and fast-growing Internet protocol (IP)-based business with SBC's local exchange, broadband and wireless solutions. The new company's objective is to accelerate customer transition to advanced IP solutions and services, providing the nation's premier communications company with unmatched global reach.

The acquisition - mainly a stock transaction - is subject to approval by AT&T shareholders and regulatory agencies. It is expected to close in the first half of 2006.

Edward E. Whitacre Jr., current chairman and CEO of SBC's will serve as chairman, CEO and a member of the Board of Directors of the new company. David Dorman, current CEO of AT&T, will serve as president and a member of the Board of Directors, Additionally, two other members of AT&T's Board of Directors will join the SBC's Board.

The corporate headquarters for the combined company will remain in San Antonio, Texas. It is uncertain what will happen to AT&T's New Jersey locations, as the role the company will play in the newly formed company's future has not been determined.

Founded in 1885 by Alexander Graham Bell, AT&T has been known for unparalleled quality and reliability in communications for more than 125 years. However, since its breakup in 1984, the company has consistently lost market-share to rival providers. In an effort to reinvent itself, the company had gone through a series of acquisitions and spin-offs over the years, including: the purchase of National Cash Registers (NCR), a computer company it acquired in 1991 for $7.3 billion and then sold; McCaw Wireless, which it purchased for $11.5 billion in 1994 and spun off as AT&T Wireless (it would then be purchased by Cingular); the acquisition of TCI and MediaOne cable companies for the creation of AT&T Broadband, which was later acquired by Comcast. More significantly, it spun off its systems and equipment operations for the creation of Lucent Technologies in 1996, shifting its famed Bell Labs into Lucent.

Internet technology, mobile phones and regulations imposed on AT&T by the government consistently undermined the company's economic base, squeezing it out of whatever market it entered. Last year, it announced it would stop marketing its long distance and local services to the consumer market and focus solely on business networks. Ironically, the purchase by spin-off SBC's is designed to help AT&T reenter the local phone market, although there is speculation the merger will be scrutinized for possible antitrust violations, as the company will be reentering territory it was forced to relinquish in 1984.

In addition, the merger has prompted SBC's to cut 500 engineering positions from the AT&T Labs facility, raising doubt as to the lab's future. AT&T Labs was formed when AT&T took back some of its Bell Labs engineers, who were handed over to Lucent Technologies. These Bell engineers are credited for inventing radar, sonar, stereo, teletype, the transistor, hearing aids, artificial larynxes, talking movies, and the telephone. It is uncertain whether SBC's will maintain the AT&T Labs facility, which employs approximately 6,900 people, or scrap it in favor of its own SBC's Labs in San Antonio.

Last year, AT&T slashed 12,500 jobs in response to plummeting long distance rates in the consumer telephone business, and the newly formed company has said it Mll cut another 13,000 jobs. It is yet to be determined whether the cuts will come from SBC's workforce or AT&T's.

Currently, AT&T employs 61,600 workers, compared to 383,000 workers in 1984.

A Fortune 50 company, SBC's roots can be traced back to the original Bell Telephone Company. SBC's purchased Pacific Telesis and Ameritech, and went on to form Cingular with Bell South Corporation, which became the nation's largest cellular phone company when it acquired AT&T Wireless last year. SBC's currently employs 167,000 workers, and offers local, long distance, wireless, DSL, satellite television and data networks services in 13 states, as well as 30 additional metropolitan areas around the country.

According to Whitacre, the communications industry is undergoing a profound transformation as it transitions to unified, IP-based networks capable of delivering a host of integrated services. "To manage this evolution, Customers need a partner with the resources to provide new service platforms and product sets, while maintaining world-class reliability and security 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 said. "By doing so, we will renew America's leadership in communications technology, with products and services that set the standard for how businesses and individuals communicate."