SBC to acquire AT&T Corp. for $16 billion

NEW YORK — The purchase of AT&T Corp. by SBC Communications Inc. saves “Ma Bell” from a nosedive into irrelevance in the industry it created more than a century ago. It also gives SBC the name and the network to fulfill its goal of being viewed as a truly national player rather than just a local telephone company.

The $16 billion marriage of long-bitter rivals, which may take until mid-2006 to clear intense regulatory scrutiny, would add long distance and business services to the list of markets where SBC holds a dominant role. It is already the first or second largest U.S. provider of local calling, wireless and Internet services.

The deal announced Monday also sparks immediate speculation as to whether two other largely regional powers, Verizon Communications Inc. and BellSouth Corp., will need to keep pace by purchasing MCI Corp. for its national network infrastructure and roster of corporate clients.

While both SBC and Verizon are by now far larger than New York-based AT&T on many fronts, the business customers served by AT&T and MCI include far more major corporations with national communications needs. Many of those customers are hesitant to switch providers for a lifeline as vital as communications, making it hard for the Bells to lure away AT&T’s clients.

For that reason, SBC made clear that the globally recognized AT&T brand name would not disappear as a result of the deal.

The companies declined, however, to say whether the AT&T name might be used for specific services or possibly even replace SBC, which formerly stood for Southwestern Bell Communications and therefore carries some non-national connotations which San Antonio-based SBC has strived to leave in the past.

“We obviously need a few days to figure all this out because this (deal) came together kind of quick,” Edward E. Whitacre Jr., SBC’s chairman and chief executive, said in a conference call.

“But,” he stressed, “It’s a great name. It’s not going away.”

While it’s doubtful the valuable AT&T brand would ever have been abandoned, AT&T the company has been rapidly decaying as a viable business for five years, battered by multiple financial traumas.

First came an overpriced binge of acquisitions in the cable TV industry designed to give AT&T its own direct wire into the homes of consumers for the first time since it was forced to spin off its local phone lines in 1984, creating Southwestern Bell and six other “Baby Bells.”

Then came the collapse of the technology bubble and its briefly insatiable demand for telecommunications services; criticism over its inability to match the fraudulent numbers being reported by WorldCom (now MCI); and regulatory changes that will end AT&T’s ability to lease local Bell lines at low government-set rates.

AT&T’s revenues have been on a steady slide, from nearly $50 billion in 1999 to $30.5 billion in 2004. Its residential customer base has fallen from a peak of 60 million to about 24 million at the end of last year. In their quarterly update two weeks ago, AT&T executives declined to suggest either trend might end any time soon.