SBC Communications Inc. and Southern New England Telecommunications Corp. last week executed a definitive agreement to merge in a $4.4 billion stock transaction.
San Antonio, Texas-based SBC, a regional telephone company that has several wireless markets in the Northeastern United States, said SNET’s wireless markets complement its own and will help it compete with Bell Atlantic Corp., the regional phone company that dominates the region.
“SBC has significant wireless businesses in the Boston area and upstate New York and they very nicely abut SNET’s wireless business in Connecticut, Rhode Island and western Massachusetts,” said Edward Whitacre, chairman and chief executive officer of SBC. “Clearly, we will be working hard to pursue synergistic opportunities there with our two businesses on a combined basis.”
Some analysts say the agreement is a strategy by SBC to bolster its wireless presence in the Northeast, more than it is a landline or long-distance play.
“It’s a race to become tops in pops,” said David Roddy, chief telecom analyst for Deloitte & Touche Consulting Group Inc., noting that Connecticut boasts a high per-capita income. “Any addition to covered pops, particularly rich ones, has to be a good business plan.”
Patricia Martin, director of the communications and information technology group at Decision Resources Inc., said, “SBC is really showing managerial brilliance. SNET is a nice piece of real estate,” she added, noting that SNET’s market gives the company a gateway to Europe in addition to the Asia Pacific link it gained after acquiring Pacific Telesis Group last year.
SNET, Connecticut’s primary landline operator, ranked 15th on RCR’s 1997 Top 20 Cellular Carriers list with 392,000 customers. Following news of the planned merger, SNET stock rose more than $10, while SBC’s stock was down slightly.
The transaction, which is subject to regulatory and shareholder approvals, is expected to close by the end of the year. SNET will continue to operate under the SNET name and remain in its New Haven, Conn., headquarters, said the companies.
“We have been beginning to feel the pains of being relatively small and realize that with all the players in the industry continuing to get much bigger that it might be wise for us to try to hook up with a quality larger company to assure our success over the long term,” said Daniel Miglio, chairman and chief executive officer of SNET. “We were very fortunate to find the right company and the right deal and here we are.”
Although he would not comment on whether SNET had entertained other offers, Miglio did say SNET and SBC had been in negotiations for “two or three months.”
Bell Atlantic, which had been rumored to be in merger talks with SNET, said, “Given our priorities, investing in SNET is not a strategic imperative. Bell Atlantic already has a very successful statewide wireless presence in Connecticut as well as a significant wireline operation.”
Decision Resources said an SBC/SNET combination will be more beneficial to SNET than if it had been acquired by Bell Atlantic. “Had Bell Atlantic acquired SNET, the importance of that small company would have been minimal, but to SBC, SNET becomes the bulwark in the East and the key to the New York and European markets,” said the firm.
SBC, formerly known as Southwestern Bell, serves customers in seven western states, including Texas and California. The company offers services and products under the Southwestern Bell, Pacific Bell, Nevada Bell and Cellular One brand names.
Whitacre said the decision to merge with SNET was not premature in light of the fact that the company is still working to integrate with Pacific Telesis.
“They couldn’t wait,” said Decision Resources’ Martin. “Someone was going to buy SNET.”
Whitacre said there are no plans to lay off any of SNET’s 9,700 employees.
