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.
JOB CUTS FEARED
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
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
"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
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
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
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.