AW & all: Some Recent Telecom Deals
Aren't Clanging Loud Bells
interactive.wsj.com.
Excerpts:
Results Are a Mixed Bag
After telecom companies have announced big deals, their stocks have had a decidedly mixed performance. Here is how six stocks fared from their deals' announcement date to Wednesday:
Company Date
Announced Share(s)
Price
S&P Industry
Group
Bell Atlantic 1 April 22, 1996 +36 +75 +56
SBC 2 April 1, 1996 +66 +74 +61
Ameritech 3 May 11, 1998 +8 +2 +3
MCI 4 Nov. 10, 1997 +57 +22 +40
WorldCom 5 Nov. 10, 1997 +72 +22 +40
AT&T 6 June 24, 1998 -2 -1 +4
1 -- Agrees to acquire Nynex. Deal closes Aug. 14, 1997.
2 -- Says it will buy Pacific Telesis. Deal closes April 1, 1997.
3 -- Agrees to be bought by SBC. Deal pending.
4 -- Agrees to be bought by WorldCom. Deal pending.
5 -- Agrees to buy MCI. Deal pending.
6 -- Says it will buy cable company, TCI. Deal pending.
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WorldCom Inc. and MCI Communications Corp. announced merger plans in November. With the deal nearing a closing, WorldCom shares are up 72% and MCI shares are up 57%, compared with 22% for the S&P 500 and 40% for long-distance stocks in the past nine months.
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Of course, most fund managers haven't beaten the S&P, either. The Wall Street types who recommend telecom stocks say investors shouldn't be alarmed by this lackluster performance. They argue that it is too soon to judge, note that investor fears about new competition in the local-phone market have hurt stocks in the short term, and say the long-term upside is buoyant.
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Fund managers say a big takeover needs time to slash costs and mesh businesses, and then more time for the stock market to catch on. "Over time, cost synergies do benefit value," insists Robert Gensler of T. Rowe Price Associates.
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It will take months before a verdict is reached on Ameritech's pact to be bought by SBC and on AT&T's move to acquire TCI. Investors might well hope for a fate similar to WorldCom-MCI. The deal isn't done, but lately it sings. It was valued at $37 billion, or $51 a share, for MCI in November. By Wednesday's close, thanks to a sharp rise in WorldCom's price in nine months, it has swelled to $50.1 billion, or $67.33 for each MCI share. Who wouldn't gloat?
"We're both from the same cloth, we've been able to come together quickly," says MCI spokesman Frank Walter. "MCI-WorldCom is very well-positioned."
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