The Association of U S West Retirees



Employees Brace For Possible AT&T Merger
Written by USA Today
Monday, March 6, 2006

AT&T on Sunday announced plans to buy BellSouth for $67 billion in stock, about an 18% premium over BellSouth's current share price, and assume about $22 billion in debt.  The result would be a telecommunications behemoth with about $120 billion in annual revenue.


AT&T says it expects the $67 billion deal for BellSouth to save it $2 billion annually, partially from job cuts and combining the two workforces.

Officials would not say how many jobs might be cut if the deal is approved by shareholders and regulators over the next year, but staff reductions are common in such mergers.  Cingular Wireless, a joint venture of AT&T and BellSouth, cut about 7,000 jobs after its $41 billion acquisition of AT&T Wireless in October 2004.

More savings from the proposed acquisition would come from reduced advertising expenses and combining the backbone network and information-technology operations of the companies.

The purchase of BellSouth would give AT&T total control of Cingular, the nation's largest cellphone provider, and BellSouth's nine-state network. Together, the three companies employ more than 316,000 people.

The Bell Telephone System was broken up by court decree in 1984.  At the time, AT&T was carved out and set aside as an independent long-distance carrier.  Seven regional Bells were also created and given control over the nation's local phone markets.  With the BellSouth deal, four of the seven Bells plus AT&T would make up the company known as AT&T.  Two more, plus GTE and MCI, belong to Verizon.

Consumer advocates and others fret that this hyperconsolidation could lead to higher prices across the board for wireless, long-distance, Internet connections and more.

"This is re-creating the Bell phone monopoly," says Berge Ayvazian, chief strategy director of Yankee Group.

Gene Kimmelman, director of Consumers Union, agrees.  "This demonstrates the enormous failure of antitrust oversight of the phone industry," he says.  He says his group plans to ask the Department of Justice, from which the deal needs approval before it can close, to block it.

The combined entity would be called AT&T.  Telecom giant SBC late last year purchased what was left of AT&T and adopted the AT&T name.

Edward Whitacre, AT&T's chairman and CEO, says people are getting unnecessarily worked up.

Owing to its size, reach and resources, he says, the AT&T-BellSouth combination would be able to serve customers better.  As for the concern that the telecom giant will raise prices, Whitacre says not to worry;  it's not going to happen:  "It's going to be very good for consumers.  We'll have more products, better services and better prices."

Whitacre allows that the merger also would make life easier for AT&T, especially on the wireless front.  Cingular, the No. 1 cellphone carrier, is jointly owned by AT&T and BellSouth.

Shortly after the AT&T-SBC merger closed, AT&T announced plans to sell Cingular services under the AT&T name.  That worried BellSouth, which, together with SBC, had spent billons promoting the Cingular name.

With BellSouth out of the way, AT&T would be free to manage Cingular as it sees fit.  One of its first actions would be to dump the Cingular name and replace it with the AT&T brand.

Roger Entner, a wireless analyst at Ovum, says that would be a mistake.  "AT&T in wireless is such a wounded name.  It gives everybody the creeps who experienced the AT&T Wireless experience."

AT&T Wireless, which was spun off from AT&T a few years ago, was beset by network problems.

Whitacre says he isn't worried about that.  "It won't have a black eye this time," he says flatly.

Just one Bell would be left standing with BellSouth out of the picture:  Qwest.  It's a combination of one of the original Bells US West and Qwest, a long-distance carrier.  The company, which has a heavy debt load and an unattractive territory in the mountain West, has entertained purchase offers.  It has been unable to strike a deal.