|
Big Baby Bell battle?
|
 |
January 5, 1998: 2:32 p.m. ET
SBC's first move after legal victory may be attack on fellow Baby Bell
|
NEW YORK (CNNfn) - The $4.4 billion merger proposal between SBC Communications Inc. and Southern New England Telecommunications Corp. could signal the first shot in a war between the Baby Bells.
On Monday, SBC said it would buy Southern New England (SNG), which provides long- distance service to about 20 percent of Connecticut, along with wireless phone service to most of that state. It also provides wireless service in Rhode Island and western Massachusetts.
SBC (SBC), based in San Antonio, Texas, provides local phone service mainly in the southwestern United States, although it does have wireless operations in Boston, upstate New York and Washington D.C./Baltimore.
While the two companies are not competitors in any local or wireless markets, SBC is claiming ground in an area where a fellow Baby Bell, Bell Atlantic, already is present.
"It is a surprise," said Blake Bath, a telecommunications analyst with Lehman Brothers.
"The fact that SBC is moving outside of its region so aggressively, really into Bell Atlantic's (BEL) backyard, suggests that they are attacking some of the other Bells."
The move could lead to retaliation from Bell Atlantic, Bath said, which may attempt an incursion into SBC's southwestern U.S. stronghold, particularly Texas and California.
Bell Atlantic would not immediately comment on the SBC deal.
The move is especially surprising since the decision by a federal judge last week to overturn parts of the Telecommunications Act of 1996 was supposed to pave the way for Baby Bell's like SBC to eat into the markets of long-distance providers like AT&T Corp. (T) and MCI Communications Corp. (MCIC)
The judge ruled that the 1996 act unfairly restricted local phone service providers like SBC from offering long-distance within the areas they serve.
For its part, AT&T doesn't seem concerned about the SBC deal.
"I don't think [the SBC acquisition of SNET] is a defining event," said AT&T CEO Michael Armstrong. "I don't think it does anything to open markets or promote competition."
Analysts tend to agree with the AT&T assessment, saying that any major move by the regional Bells into the long-distance market is probably at least two years off.
SBC is paying $65.83 per SNET share, a 33 percent premium over the Friday closing price of SNET shares, which rocketed ahead Monday after the news.
SBC justified the price by saying that Connecticut, the state with the highest per capita income, is an attractive market and it now can offer Connecticut customers a full bundle of services.
It also said that SBC can squeeze significant cost savings out of the merger. For example, SNET pays 20 percent more for some of its telephone switching equipment. SBC said that SNET will be able to use its increased size as part of SBC to negotiate better deals.
The companies said they expect to complete the merger by the end of the year, pending regulatory approval.
That approval may be harder to come by after Rep. Edward Markey, the ranking Democrat on the House Commerce Committee's telecommunications subcommittee, urged regulators Monday to block the merger.
Markey claimed that SBC "acted in bad faith and has reneged on promises made during consideration of the Telecommunications Act."
|
|
|
|
|
|
SBC Communications
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
