NEW YORK – AT&T Inc. said Sunday it will acquire smaller rival BellSouth Corp. for $67 billion in stock, in an apparent bid for total control of their growing joint venture, Cingular Wireless LLC.
The deal would substantially expand the reach of AT&T, already the country's largest telecommunications company by the number of customers served.
AT&T will pay 1.325 of its own shares for each BellSouth share. Based of Friday's closing price of $27.99 for AT&T shares, that works out to be $37.09 for each BellSouth share, an 18 percent premium from the Friday closing price of $31.46 for the Atlanta-based company.
AT&T was formed by San Antonio-based SBC's acquisition of AT&T Corp. in November. The deal added a substantial national reach to the former Southwestern Bell's local business, which is concentrated in 13 states, including Texas, California, and the Midwest.
BellSouth is the dominant local telephone provider in nine Southeastern states.
The merged company would have 70 million local-line phone customers and nearly 10 million broadband subscribers.
The combined company will be based in San Antonio, and Ed Whitacre, AT&T's chairman and chief executive, will keep those positions. His counterpart at BellSouth, Duane Ackerman, 63, will run BellSouth's operations in a "transition period" after the merger.
Cingular's headquarters will stay in Atlanta, as will the headquarters for the former BellSouth region.
Under the deal, the Cingular brand will be phased out in favor of the AT&T brand. The name will be familiar to wireless customers: AT&T Wireless Inc., a spin-off of AT&T, was acquired by Cingular in October 2004.
Cingular has grown strongly since it was formed in 2001 by the merger of a number of regional wireless carriers, and there has been speculation that AT&T wanted to assume full control of this growth business, in part to be able to market it under the AT&T name.
BellSouth's price for its Cingular stake may have been an outright sale of the whole company.
The wireless operations will be the growth engine of the new company, and will account for one third of the combined revenue.
AT&T expects the acquisition to save it $2 billion annually, starting the year after the deal closes. About half of the savings would come from reduced advertising expenses and from combining their work forces.
The rest of the savings would come from combining the backbone network and information-technology operations of the two companies.
Together, the companies will employ more than 316,000 people, though that head count may fall as the company eliminates redundant operations.
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