AT&T to Buy BellSouth for $67 Billion

AT&T on Sunday confirmed it plans to acquire BellSouth in a deal valued at close to $67 billion. The newly merged company would become the largest telecommunications service in the United States, surpassing Verizon and giving AT&T full control over Cingular, the largest wireless operator.

Under terms of the deal BellSouth shareholders will receive 1.325 shares of AT&T common stock for each common share of BellSouth. This exchange ratio equals $37.09 per BellSouth share -- a 17.9% premium. AT&T chairman and CEO Edward Whitacre will retain his position and serve as CEO of the new company.

The Wall Street Journal first reported on the merger late Saturday night, prompting the companies to issue an official statement.

The original AT&T was acquired by SBC Communications last year in a deal valued at $16 billion. SBC then changed its name to AT&T in November and kicked off a marketing blitz to breathe life back into the aging, but well recognized, brand.

AT&T says the purchase of BellSouth would result in cost savings of approximately $2 billion. The growth of Cingular Wireless and competition from cable operators are said to be two of the primary reasons behind the merger talks.

"This merger is a logical next step that creates substantial value for customers and stockholders of both AT&T and BellSouth," said Whitacre. "It will benefit customers through new services and expanded service capabilities. It will strengthen Cingular through unified ownership and a single brand."

Still, such a deal will require U.S. government approval and it's not clear how many obstacles will arise. Verizon faced a harsh backlash following its proposed purchase of MCI last year, but the deal was eventually approved with few restrictions.

AT&T and BellSouth executives are hopeful that regional separations will aid the process, as the two companies do not directly compete.

"Our focus is on providing great service and innovative, competitively priced products for consumers and businesses throughout the Southeast, the nation and the world," added Whitacre. "Together, we will lead the way into a new era of converged and bundled communications, video and entertainment services while also improving our ability to manage complex networks."

"Technology changes and convergence are shaping a new competitive dynamic and creating tremendous opportunity," said BellSouth CEO Duane Ackerman. "We're creating a company with much better capabilities to seize these opportunities while maintaining its strong focus on customer service and community involvement. This was the right time for this merger."

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NEW YORK (Reuters) - AT&T Inc. , which has agreed to buy BellSouth Corp. for $67 billion in stock, Monday said it expects to cut some 10,000 jobs between 2007 and 2009, once the acquisition has closed.

The deal, announced on Sunday, would bring ownership of Cingular Wireless, the No. 1 U.S. wireless telephone company, under one roof, which Wall Street analysts have said would streamline management and allow one parent company to enjoy all of the financial benefits.

A purchase of BellSouth would recombine the former AT&T (Research), also known as "Ma Bell," with four of the seven original "Baby Bell" regional telephone companies that were split off when AT&T was broken up by a court order in 1984.

At the time, AT&T controlled the long-distance telephone assets and its seven offspring offered regional and local telephone services.

Together, AT&T and BellSouth (Research) would have a national long-distance telephone and data network, residential customers stretching from Florida to California and business customers comprising more than half of the Fortune 1000, analysts have said.

The next largest telephone company is Verizon Communications.

Meanwhile, two consumer groups said Sunday that they'll urge U.S. antitrust authorities to block the deal, arguing it would lead to higher prices.

Consumers Union and the Consumer Federation of America said they would ask the Justice Department's antitrust division to reject the $67 billion deal that would extend AT&T's reach and solidify its position as the No 1. U.S. telephone company.

BellSouth stock jumped about 11 percent in morning trading while AT&T fell about 1 percent, both on the New York Stock Exchange.

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