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SBC rings AT&T for $16bn mega-merger

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SBC is buying former parent AT&T for $16bn in cash and shares. AT&T, or Ma Bell, was started in 1875 by Alexander Graham Bell.

AT&T shareholders will get 0.77942 SBC shares for every AT&T share held and a special dividend of $1.30 per share. The deal was agreed by directors yesterday.

SBC is a local specialist in the US. It has 52 million access lines and 5.1m DSL customers. Its broadband network covers 77 per cent of its local customer locations. It owns 60 per cent of US mobile firm Cingular which has 49m subscribers.

AT&T works at the other end of the market - it serves almost every member of the Fortune 1000. Its global network covers 50 countries and it has 26 internet data centers, 13 in the US and 13 across the world. It also claims the "world's premier communications research organization, AT&T Labs"

Edward Whitacre, SBC chairman and chief executive officer, who will lead the new company, said: "The communications industry is undergoing a profound transformation as it transitions to unified, IP-based networks capable of delivering a host of integrated services. To manage this evolution, customers need a partner with the resources to provide new service platforms and product sets, while maintaining world-class reliability and security. This merger creates that company." He promised the new company would regain America's lead in communications.

SBC expects the merger to slow revenue growth in the short term but have a positive impact by 2007. Opportunities include more wireless sales in the enterprise market and the chance to take AT&T IP services, traditionally sold to enterprises, to smaller business and residential customers.

AT&T has about $6bn in debt and SBC has $26bn, excluding Cingular Wireless.

Whitacre will serve as chairman and CEO of the new firm. David Dorman, AT&T chief executive, becomes president of the new firm. No decision has been made on what the firm will be called.

Press release available here. ®

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