A request by Connecticut’s attorney general and state utility regulators that a combined SBC Communications Inc./Southern New England Telecommunications Corp. reduce its local telephone rates could put the planned merger in jeopardy.
SBC reportedly said it might scrap the planned merger if regulators approve the attorney general’s request for a $110 million cut in phone rates. A motion was filed at the end of last month to block the merger “due to the companies’ repeated failure to provide information on whether and how rates will be reduced.”
“By stubbornly refusing to disclose this information, the companies are depriving Connecticut consumers of basic facts they have a right to know by law and the state has a duty to demand,” said Attorney General Richard Blumenthal. “Until and unless they are willing to provide this information, this merger should not be allowed to proceed.”
Blumenthal suggested that savings realized by the merger should amount to a rate reduction of about $110 million, or about $4 per month in basic monthly rates. Blumenthal based that figure on an estimated $220 million in cost savings expected from the merger.
Madelyn DeMatteo, senior vice president and general counsel at SNET, said the $220 million figure was “pulled out of the air,” according to an Associated Press report.
“It’s just not fair, and it’s incredulous that any business would have their prices arbitrarily reduced by that amount,” she said.
The AP quoted Edward Whitacre, chief executive officer of SBC, as saying, “We would not do the deal under those terms. It makes no sense because we wouldn’t make a profit.”
SBC and SNET announced plans to merge in January in a $4.4 billion stock swap. SBC also last month announced it would acquire Ameritech Corp. in a deal that also is expected to raise regulatory questions.
The Connecticut state Department of Public Utility Control was scheduled to hold hearings last week, and a final decision is expected by Sept. 2.
