NEW YORK — SBC Communications Inc. said Tuesday it plans to eliminate about 13,000 jobs after completing its $16 billion takeover of AT&T Corp.
Executives emphasized that many of those positions can be cut through attrition rather than layoffs.
The projection came a day after SBC announced a deal to buy AT&T, its former corporate parent.
Among the areas targeted by the cuts include sales, management of phone networks, customer support, human resources and lobbying.
The cuts would come in addition to existing plans at the two telephone companies to eliminate at least 12,000 jobs before the merger is completed at least a year from now.
San Antonio-based SBC recently indicated it would cut about 7,000 positions from its work force of 163,000 during 2005, primarily through attrition.
AT&T, based in Bedminster, N.J., had already planned to eliminate at least 5,000 of its 47,000 jobs this year. Those cuts will probably involve layoffs at its customer call centers, which are being closed.
source: http://sfgate.com/cgi-bin/article.cgi?file=/n/a/2005/02/01/financial1524EST0232.DTL&type=printable
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 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, Texas-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.
The agreement calls for each share of AT&T to be purchased for SBC stock worth $18.52 at Monday’s price, plus a cash payment of $1.30, for a total value of $19.81 per share.
That represents little premium over AT&T’s share price, which rose sharply last week amid reports a deal with SBC was being discussed. In Monday’s trading, AT&T shares fell 52 cents, or 2.6 percent, to $19.19 on the New York Stock Exchange. SBC’s shares rose 14 cents to $23.76 on the NYSE.
Combined, SBC and AT&T would have had $71.3 billion in revenues in 2004, slightly surpassing the $71.28 billion reported for 2004 by Verizon.
The deal likely won’t close until mid-2006 due to the unusual number of government regulatory bodies who’ll need to weigh in on whether it might hurt competition. The regulatory review is expected to include two federal agencies and at least 26 state agencies.
SBC and AT&T executives were adamant Monday that the competitive issues which prompted the government to break AT&T into eight companies in 1984 are no longer relevant in a market which now includes numerous nontraditional competitors including cellular providers, cable companies and Internet-based phone services.
But at least one consumer advocacy group immediately rejected that contention.
"Consumers have only two choices — a single cable company that dominates video and high-speed Internet or a regional Bell operating company that dominates local, long distance and wireless," said Mark Cooper, director of research for Consumer Federation of America. "Two companies are not enough to provide serious price competition or strong incentives to innovate."
Because SBC and AT&T must continue to compete as if their merger may not occur, AT&T indicated it will proceed with plans to launch its own brand of cell phone service this year.
In an interesting twist, the new AT&T Wireless will compete directly with Cingular Wireless — which SBC owns in partnership with BellSouth. Cingular recently became the nation’s biggest cell phone company with 49.1 million subscribers by acquiring the old AT&T Wireless, which AT&T Corp.
spun off as an independent company in 2001.
AT&T doesn’t own a wireless network, so it had struck a deal to use Sprint Corp.’s cellular system.
AT&T executives declined to say whether that deal would stand or whether they might now seek to forge an agreement to use Cingular’s network.
Remember when one company held a virtual lock on traditional telephone service? Those days could be back again. Soon.
SBC Communications, already the biggest telephone company in California and 12 other states, is likely to become even more dominant if regulators approve its $16 billion deal to take over rival AT&T.
SBC already controls close to 90 percent of the traditional local residential market and nearly half the long distance market in most of California, consumer advocates say. But after buying AT&T, it is likely to become even stronger, gaining millions of customers in California alone.
SBC, which bought Pacific Bell in 1997, and AT&T announced their proposed merger late Sunday. Under terms of the deal, AT&T shareholders would get $15 billion plus $1 billion in special dividends.
AT&T shareholders and state and federal regulators must approve the deal, which is expected to be completed by early next year. SBC would become the nation's largest telecom carrier, overtaking Verizon Communications.
In addition to gaining market share, consumer advocates say the deal also will eliminate SBC's main foe in regulatory and court proceedings, in which AT&T fought for access to SBC's local phone lines. That could make it harder for smaller telecom companies to compete with SBC.
"It's going to have a chilling effect on competition,'' said Regina Costa, telecommunications director for The Utility Reform Network, a consumer watchdog group.
But SBC executives say the number of traditional local phone lines they control is irrelevant because they face growing competition from wireless phone carriers, Internet telephony providers and cable TV operators jumping into the phone business.
"I would not concede we are dominant in telephone service,'' said Dorothy Attwood, SBC's senior vice president for regulatory policy and planning, referring to new competitors. "It's rather backward-looking to identify a market in terms of (traditional) local and long distance lines."
Indeed, analysts say millions of customers across the country have signed up for telephone service from cable companies or through their Internet service. Millions of wireless customers have cut the cord on their landlines, relying exclusively on wireless phone service for their home phones.
But most Californians still rely on SBC for conventional phone service, consumer advocates point out.
More than half of Americans have signed up for wireless service, but only about 7 percent have been willing to give up their landlines, possibly because many people consider cell phones too unreliable. Dropped calls are common. Many people can't get home service at all without stepping onto a porch or driveway. And 911 service is primitive. In many cities, emergency calls are routed to the California Highway Patrol, where callers are frequently put on hold. And emergency operators often can't tell where callers are without asking.
Cable telephony also remains a minor player for now. Nationwide, cable providers account for only about 2 percent of local landlines. And the service isn't even available in many areas, including many cities in the Bay Area.
Analysts also differ over when Internet telephony will take off. Less than 1 percent of customers now have Internet telephone service, which is available only to customers who have high-speed Internet service. SBC, the largest high-speed Net provider in California, won't sell customers the feature unless they also sign up for local phone service with the company.
The arguments over SBC's dominance undoubtedly will come to a head at the California Public Utilities Commission, which is charged with regulating phone service in California.
If the AT&T deal goes through, some consumer advocates and regulators will push to treat SBC more like a monopoly -- and more strictly monitor the company's rates and service. For the past 20 years, regulators have gradually loosened controls, citing increased competition from companies such as AT&T. But some say the approach should change now that SBC is gaining market share.
"We have to look much closer to regulation,'' said Geoffrey Brown, a member of the PUC.
Other commissioners have argued that there's less need than ever for regulation because of the growth of Internet phone service and other technologies. "It's going to a big fight," Brown said.
Even the market-share figures are up for debate.
Two years ago, the PUC estimated that SBC and other traditional local phone companies controlled 94 percent of the market in their respective territories.
Even factoring in competition from cable providers, the Federal Communications Commission said AT&T and other competitors controlled only 16 percent of the market as of June 2004. SBC put the figure at 17 percent as of last fall. But consumer advocates believe the figure might be lower because AT&T and other competitors have recently throttled back their marketing efforts, citing rising costs to rent lines from SBC and other Baby Bells.
SBC is less dominant in the long distance market, because it was allowed to start marketing the service in California and other key states only a few years ago.
But in a briefing last week, SBC said it had signed up 49 percent of its customers in its 13-state territory for long distance service.
AT&T has said it has 24 million consumer customers nationwide, suggesting that it controls more than one-fifth of the residential market nationwide. AT&T declined to give local figures.
Moreover, AT&T's market share has been dropping steadily since it decided last year to focus on the business market and stop marketing its consumer plans (except for its Internet telephone plan).
Presumably, SBC will move AT&T's remaining consumer customers to SBC plans in its core territory once the deal is completed. But SBC declined to say how it would handle AT&T's customers in other states.
"It's not clear," Attwood said. "The merger will take some time."
source: http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/02/01/MNG13B3NHO1.DTL&type=printable 2/3/2005
In most corporate mergers, the shareholders of at least one company rejoice. But it's hard to find a clear winner in the proposed acquisition of AT&T by SBC Communications.
AT&T, the nation's once-proud phone monopoly, is a shadow of its former self. It lost $6.1 billion last year, and its sales have shrunk for five consecutive years as it has shed most of its operations except for business services. Its stock has fallen by almost 72 percent during the past five years.
Today, it has fewer fans than the National Hockey League.
Among Wall Street analysts who follow AT&T, none rate it a "strong buy," one calls it a "buy," 12 give it a "hold," 11 recommend "sell," and two give it a "strong sell," according to StarMine.
Based on its average rating, it ranks 490th out of 500 large companies in the Standard & Poor's 500 index.
SBC is more diversified and in better financial shape, but faces many of the same problems as AT&T in the ultra-competitive telecommunications market. Its stock is down almost 32 percent in the last five years, compared with a loss of 11.2 percent for the S&P 500.
It's slightly more popular than AT&T on Wall Street, with no "strong buys, " six "buys," 25 "holds," four "sells" and one "strong sell." It ranks 420th on the S&P 500, according to StarMine.
The merger "is what it is," says Chuck Carlson, editor of the DRIP Investor newsletter. "I can't get real excited about it one way or another. AT&T was paddling upstream. SBC was paddling upstream, too, just not as nasty a stream as AT&T."
In theory, the acquisition will broaden SBC's product line and customer base and allow it to realize cost savings by cutting duplication. But if it happens, it won't be overnight.
"Verizon and SBC are the companies on the right path to providing everything to either businesses or households," says Mark Hillman, who owns both companies' shares in the fund he manages, Hillman Aggressive Equity.
SBC has a strong presence in residential phone service (mainly in the West and Southwest) and owns 60 percent of Cingular Wireless, which acquired AT&T's wireless business last year. (Bell South owns the remaining 40 percent of Cingular.)
SBC also offers DSL high-speed Internet service and Yellow Pages directories. But it is facing tough competition from cable companies that can offer television, Internet and phone service.
AT&T mainly serves business customers with local- and long-distance phone and data services.
"We think the merger will have some long-term benefits for the company as SBC transitions to more fiber-based services, including video. It will give them an entry into the corporate telecom services market. But we don't think it eliminates the challenges the company is facing in the near term from wireless and cable competition," says S&P analyst Todd Rosenbluth.
The merger, which must be approved by shareholders and regulators, is not expected to be completed until the first half of next year. Analysts say it won't add to SBC's earnings until 2007 or, more likely, 2008.
Carlson says he is "thinking long and hard about selling" his AT&T shares. "I'm not that interested in getting SBC stock," he says.
If the deal goes through as planned, AT&T shareholders would receive 0. 77942 SBC share for each AT&T share. Based on SBC's closing price of $23.76 on Monday, one share of AT&T would be worth $18.52 in SBC stock. The stock swap is intended to be tax-free to shareholders.
In addition, AT&T will pay its shareholders a special dividend of $1.30 per share when the deal is completed.
It's not unusual for acquiring companies to offer a combination of cash and stock, but offering the cash portion as a special dividend "is a first," says Robert Willens, a tax and accounting analyst with Lehman Bros. "We expected this would happen" when Congress lowered the tax rate to 10 or 15 percent for qualified stock dividends.
Normally, cash received in a merger is treated as a capital gain -- long-term if the stock was held more than one year, or short-term if the stock was held one year or less.
"Because the payment is characterized as a dividend, coming from A&T immediately before the merger, it will be treated as dividend income," for most shareholders, says Willens.
To get the lower dividend tax rate, however, shareholders must own AT&T for at least 61 days around the ex-dividend date. Hold it less than 61 days, and the dividend will be taxed as ordinary income, which is subject to higher rates.
Shareholders who own AT&T stock for more than one year won't receive any tax benefit from the special dividend because qualified dividends and long- term capital gains are taxed at the same rate. But it will help shareholders who own AT&T for between 61 and 365 days, Willens says.
Although it's hard to get enthusiastic about the merger, some analysts say investors who own either stock should consider holding their shares, mainly because both companies pay substantial dividends that do not appear to be at risk in the short term.
SBC's annual dividend is $1.29 per share, which amounts to a yield of 5.4 percent at Monday's price.
AT&T's regular dividend, 95 cents per share annually, equates to a 4.95 percent yield.
"SBC has come down so far I don't see a tremendous amount of downside risk," says Zach Wagner, an analyst with Edward Jones.
"The AT&T addition will lower its growth rate, but over time, SBC -- given (its) track record of integrating large acquisitions -- will squeeze out billions of savings. That should make AT&T longer term a good investment. But near term, there's certainly going to be some negative financial impact."
One of the biggest problems for shareholders of either company, whether they sell or hold, will be figuring out their cost basis.
Investors who need help figuring out their basis in AT&T or any of its far-flung family might check out Chuck Carlson's Tax Calculator for AT&T (www.atttaxcalculator.com). A one-year subscription costs $19.95. A CD version is available by calling (800) 233-5922.
source: http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/02/01/BUG1VB3JON1.DTL&type=printable
Generations of Americans can't imagine a world without AT&T.
Starting more than 120 years ago, its copper lines connected first cities, then states, then coasts, then the world. Its phones changed the way Americans worked, and over time, they way they lived, the dynamics of their relationships and families.
"People now think nothing of calling Europe and talking for an hour," said Michael Noll, a communications professor at the University of Southern California. "It's a much smaller world as a result. Central to that was AT&T."
The firm arguably created the information age. For decades, its famous New Jersey labs churned out discoveries and inventions -- the transistor, the first electrical and digital computer -- that made Silicon Valley possible.
"But for the transistor, San Jose would still be orchards," said Paul Saffo, director of the Institute for the Future think tank and a former advisory board member at Bell Labs.
If federal regulators approve, AT&T may soon disappear, swallowed by one of its own offspring, SBC Communications, for $16 billion.
But the communications pioneer has already started to fade from the public mind. So ubiquitous has the telephone become, offered in so many forms by so many companies, that AT&T's former dominance means nothing to younger Americans. They can easily picture life without Ma Bell.
"My students who are 20 years old have no idea what the Bell system is," Noll said. "They've never heard of it."
That system began as an extension of the telegraph, the most sophisticated communications medium of its time. The telegraph could carry messages long distance, but it had its limitations. Operators trained in Morse code had to peck out the messages by hand.
Alexander Graham Bell thought he could do better, and in 1875, he found two men willing to finance his work. Gardiner Hubbard and Thomas Sanders provided the capital, Bell provided the patents. After his first, famous 1876 phone call, the three men formed Bell Telephone Co. in 1877. The first phone exchange opened in New Haven, Conn., the following year.
The name that would eventually be shortened to AT&T originally belonged to a Bell subsidiary, created in 1885. The American Telephone and Telegraph Co. was created to build Bell's long-distance network, and in 1899, took over as the parent company of the Bell system.
Its wires were already spreading out from New York. By 1892, the network had reached Chicago. San Francisco hosted the first transcontinental call on Jan. 25, 1915.
At first, the telephone's impact on society didn't quite live up to expectations. Many observers expected the device to turn society upside down. Instead, most families who had phones used them sparingly, said UC Berkeley sociology professor Claude Fischer, author of "America Calling: A Social History of the Telephone to 1940." They called the doctor or the police, set up appointments, but didn't linger on the line, he said.
When they did, they encountered resistance from the phone companies, both AT&T and the local firms that sprang up once Bell's original patents expired.
Some of the resistance had technical reasons -- the first lines between cities, for instance, could handle just one call at a time. But AT&T's culture also played a part, Fischer said. The company's leadership, at first, was dominated by telegraph men who considered gossip and long conversations a waste of a vital tool.
"Their model was very much that telegraph model: You send important messages over it. You don't dilly-dally and tie it up," Fischer said. "These guys were really ticked off about people who insisted on using this socially."
The company, built on a single technological innovation, quickly generated more.
In 1925, it formally established Bell Telephone Laboratories as its research center. Bell Labs developed a reputation for attracting brilliant scientists and letting them pursue ideas that, at first, had little to do with phone service.
In 1965, Arno Penzias discovered background radiation permeating the universe, explaining it as a faint echo of the Big Bang. Bell Labs, he said, encouraged pure research to test its equipment, to provide opportunities for surprise discoveries and to lure top-notch minds.
"The fact that people like me could spend a lot of our time on fundamental research made it a place people would kill to work," said Penzias, a Nobel Prize winner who is now a partner at New Enterprise Associates and lives in San Francisco.
Modern companies have largely given up on the Bell Labs model, insisting that their researchers focus on ideas that can quickly be brought to market.
"That I find distressing, both as an American and as a global citizen," Saffo said. "If we don't have labs that do this stuff ... then who is thinking long-term for mankind?"
Backed by its technical prowess and its nationwide network, the company dominated American phone service for years as a monopoly tolerated by the federal government.
That wouldn't last. In 1982, AT&T reached an agreement with the Department of Justice to settle an antitrust suit. The firm agreed to get rid of its local telephone operations and concentrate on long-distance. In 1984, the old Bell system broke into eight smaller companies.
AT&T tried to move in new directions. But its attempts often backfired. In 1991, for example, it bought NCR Corp. to gain a foothold in computing. The acquisition was widely regarded as a disaster, and NCR returned to being a separate company in 1995.
Around the same time, AT&T's equipment division went out on its own as Lucent Technologies.
AT&T, however, could not survive on long-distance revenues, which were steadily declining as customers switched to cellular phones. That competitive squeeze laid the groundwork for SBC's acquisition.
Dick Martin, who left AT&T in 2003 as an executive vice president, is convinced the 1984 breakup sealed the company's fate.
"It's hard to know you're at a crossroads," he said. "And then when you do, it's even more difficult to realize which road you should take."
Fabled company and its history
Source: AT&T
source: http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/02/01/BUG1VB3JD51.DTL 2/3/2005
The 8,000 Connecticut residents who work for SBC Communications Inc. were left Monday wondering what the company’s historic purchase of AT&T will mean for them.
While the two companies said savings would result from consolidating some operations, they also said jobs may be added in certain areas.
"It’s too soon to tell what the impact might be" in Connecticut, said Beverly Levy, spokeswoman for SBC Connecticut.
Paul Hongo, president of Local 1298 of the Communications Workers of America in Hamden, expressed optimism.
"AT&T doesn’t have a big presence here in Connecticut, and their enterprise group has been looking to expand here," he said, referring to AT&T’s large-business customers. "I think it potentially will mean growth here. Job cuts would affect other states more."
SBC is the dominant telephone service provider in 13 states, including Connecticut.
Other SBC employees expressed concern about the merger.
"Most people are not sure what to make of it just yet," said Chris Smith, a service delivery business technician in New Haven. "People are concerned because any time two companies merge, you end up losing some jobs. Maybe it will turn out good, we don’t know."
Smith said many employees are puzzled by the move, given AT&T’s widely publicized problems.
"AT&T hasn’t been doing too well. I don’t even know what’s left of AT&T," Smith said. "We’re just hoping it translates into more work for us."
Another employee, a lineman who asked not to be identified, said, "There’s not much left to AT&T.
They’ve downsized, they’ve sold most of their plant. It’s pretty much a name."
He said it will be "sad" if the merger results in further downsizing.
SBC announced plans last year to cut 10,000 employees nationwide by the end of 2005, and 3,000 of those cuts already have been made. The company has about 100,000 workers.
An AT&T spokesman said the company does not break out its employment figures by state or region.
AT&T has 47,000 employees.
San Antonio-based SBC bought the former SNET Corp., headquartered in New Haven, in 1998. In 2001, the company changed the name to SBC SNET, and in January 2004, dropped "SNET" altogether.
SBC Chairman and CEO Edward E. Whitacre Jr. said in a conference call Monday that he plans to retain the AT&T brand name in some form.
"We are preserving an American icon," said Whitacre, who worked at AT&T for many years before moving to SBC. "I have a deep appreciation for AT&T’s accomplishments and what it represents to American business."
Whitacre also said the merger "doesn’t change" the number of job cuts planned by SBC, most of which are to be accomplished through attrition.
AT&T Chairman and CEO David W. Dorman, however, said in the conference call that he expects AT&T jobs to be cut due to duplication of services.
In a joint statement, the companies said half the merger’s anticipated $15 billion in cost savings will come from network operations and information technology, "as facilities and operations are consolidated."
Another 25 percent will come from "the combined business services organizations, as sales and support functions are combined," with another 10 to 15 percent from "eliminating duplicate corporate functions."
source: http://www.nhregister.com/site/printerFriendly.cfm?brd=1281&dept_id=517515&newsid=13861989 3feb2005
One day after announcing a plan to buy AT&T Corp. for $16 billion, SBC Communications Inc. told analysts the merger will allow the company to shed 12,800 jobs.
Most of those job cuts will be made through attrition, not layoffs, said SBC spokesman Walt Sharp Tuesday.
"We intend to achieve this to the maximum extent possible through our normal attrition," said Sharp, adding that an average 1,200 SBC employees leave each month.
San Antonio-based SBC, which provides telephone and Internet services in 13 states including Connecticut, employs 162,700 people. AT&T will add 47,000 employees if the merger, expected to take place next year, is approved.
SBC employs 8,000 people in Connecticut. The impact on individual states is not known at this point, Sharp said.
"The process would not start until the deal closes, probably next year, and the headcount reductions would continue for probably three years," he said.
Sharp said job duplication should result in a reduction of 5,100 jobs in sales and business operations, 5,100 in network operations and 2,600 in corporate functions, including regulatory and lobbying departments. Primarily white-collar jobs will be affected, he said. About two-thirds of SBC’s workers are union, hourly employees.
Sharp said some areas are expected to see job growth, such as high-speed Internet services and new entertainment initiatives.
Tuesday’s announcement came during an analysts’ meeting held in New York City.
The new reductions will come on top of previously announced reductions of 10,000 jobs at SBC through 2005 — again mostly through attrition — and 5,000 jobs at New Jersey-based AT&T.
The previously announced AT&T cuts are expected to involve layoffs in the company’s customer call centers.
SBC’s stock closed Tuesday at $23.92 a share, up 16 cents. AT&T’s stock closed at $19.14 a share, down 5 cents.
source: http://www.nhregister.com/site/news.cfm?newsid=13870454&BRD=1281&PAG=461&dept_id=517515&rfi=8 3feb2005
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