SBC, BellSouth in Talks to Create
Wireless Provider to Rival AT&T
By STEVEN LIPIN and STEPHANIE N. MEHTA
Staff Reporters of THE WALL STREET JOURNAL
SBC Communications Inc. and BellSouth Corp. are in talks to merge their
U.S. cellular-phone properties in a bid to create a near-national wireless
provider, according to people familiar with the discussions.
The discussions are centered on the creation of a new company that would
contain the domestic wireless assets of the two Bell telephone companies.
SBC, San Antonio, has 11.2 million wireless customers in key regions
throughout the country, including California, the Midwest and the
Southwest. BellSouth, Atlanta, has 5.3 million wireless customers,
primarily in the Southeast.
The talks are fluid and could break down, people close to the matter said.
Both companies declined to comment.
A merger of BellSouth's and SBC's wireless assets would position the
companies to compete with the likes of AT&T Corp., now the nation's
largest wireless operator with about 12 million wireless customers, and
Sprint Corp.'s Sprint PCS business, which boasts a national, all-digital
network and about six million customers.
Bell Atlantic Corp., meanwhile, recently agreed to forge a joint venture
with Vodafone AirTouch PLC of Britain that melds the Bell company's
East Coast wireless assets with Vodafone's West Coast properties. When
that joint venture is fully operational it will be the largest U.S. wireless
operator with more than 20 million customers.
National wireless networks are becoming increasingly important because
consumers want to use their cell phones as they travel throughout the
country. With a national network, a carrier doesn't have to pay costly fees
when its customer "roams" onto another carrier's network.
In many ways, SBC's network complements BellSouth's. Both use the
same digital technologies, and their properties don't overlap. They also
need each other. SBC's stock has sagged in recent months, in part on
concerns about its lack of national wireless assets. BellSouth, too, has
been dogged with questions about its ability to extend its wireless network
beyond its nine-state territory.
At 4 p.m. in New York Stock Exchange composite trading, SBC rose
93.75 cents to $37.9375 and BellSouth rose $1.6875 to $40.5625. The
biggest obstacle to such a combination may be the issue of control. Both
companies have strong management teams that have shown an
unwillingness to share power. The talks have been on-again, off-again for a
couple of years without a deal being consummated, but heated up lately.
But if the companies can work out such issues, they would have a valuable
asset on their hands. BellSouth, one of the more fiscally conservative
telephone companies, values its domestic wireless assets alone at more
than $21 billion. Some analysts value the Bell Atlantic-Vodafone joint
venture in the U.S. at more than $80 billion. And AT&T's initial public
offering of its wireless tracking stock this spring is expected to be the
largest IPO in history.
Write to Steven Lipin at steve.lipin@wsj.com and Stephanie N. Mehta at
stephanie.mehta@wsj.com |
