SBC/Ameritech

SBC, Ameritech see core business shift

By John Borland
Staff Writer, CNET News.com
January 21, 1999, 12:30 p.m. PT

news analysis As SBC Communications and Ameritech move toward merging their operations, their core businesses are changing as quickly as their ownership.

The two companies each released fourth quarter earnings today, showing companies driven more and more by data, wireless, and overseas operations rather than their traditional local phone business.

In Ameritech's case, a full third of its annual revenue growth came from its data business. This still amounts to a relatively small part of revenue for the overall company--$1.7 billion of a total $17 billion--but the trend line is pointing sharply upwards.

SBC, which has begun investing more heavily in rollouts of high-speed Internet services for consumers and businesses, said that its data services revenue for the year increased by 32 percent, to a total of more than $2.2 billion. Total 1998 revenues were $28.8 billion, up 7.9 percent from the year before.

Both companies also showed strong growth in wireless operations and in overseas investments. European affiliates accounted for a third of Ameritech's growth in the fourth quarter, the company said.

The financial news underlined what has been a growing trend for the Bells toward investment in new high-growth data services, as they try to find ways to keep revenue high--even while new competitors undermine profit margins in local phone markets.

Analysts say this earnings trend will continue, perhaps even pick up as the companies eventually win access to long distance markets and are able to bundle data, long distance, and local service in a single package without today's regulatory restrictions.

The companies are getting a jump on this package with today's early investments in data services, said Goldis-Pittsburg Investment Services analyst Marjorie Saint-Anne.

But the companies are still focusing most heavily on their core business, despite the revenue boost from the new markets, she added.

"Traditional local service is still their main source of revenue," Saint-Anne said. "They're not going to back away from that. But to raise revenue they are concentrating on other areas where demand is high, since the local telephone market is close to saturated."

The two companies are taking roughly same directions in new markets, though SBC has stepped far beyond Ameritech in rolling out DSL, or digital subscriber lines, for high-speed Internet access.

"Today's earnings news showed that both companies are obviously remaining focused," said Ameritech chief financial officer Oren Shaffer in an interview with CNBC today.

The strong growth in parallel markets for the two companies underlined the reasons for the merger, he added. "That gives us confidence that our post-merger earnings will also be strong," Shaffer said.

 

 

SBC gets DOJ approval for Ameritech buy

By Bloomberg News
March 23, 1999, 2:30 p.m. PT

WASHINGTON--SBC Communications agreed to sell cellular phone systems in 17 markets, including Chicago and St. Louis, to settle U.S. competitive concerns about the company's acquisitions of Ameritech and Comcast Cellular.

The settlement with the Justice Department brings the two companies another step closer to becoming the largest U.S. local phone company at a time when the entire telecommunications industry is reshaping itself.

Bell Atlantic is now the largest local phone company, SBC is second, while Ameritech holds the industry's No. 5 spot.

SBC has agreed to buy Ameritech for $77.5 billion in stock at today's prices and to pay $1.67 billion in cash for Comcast Cellular.

SBC and Ameritech agreed to sell one of two cellular systems in markets where their operations overlap in Illinois, Indiana, and Missouri, the Justice Department said.

The Federal Communications Commission must approve the transactions, announced last May, as well before they can take effect. The FCC has suggested it may seek tougher restrictions to assure the alliances are in the public interest.

Nevertheless, some analysts suggested that today's Department of Justice approval will help ameliorate some FCC concerns.

"What the Department of Justice said is that it did not find that the merger was anticompetitive under U.S. law," said Scott Cleland, a telecommunications analyst for the Legg Mason Precursor Group. "That makes it harder for the FCC to make the case that this merger harms competition."

SBC and Ameritech executives have repeatedly said they need to merge to reach the size needed to compete in long distance and other local phone markets. But some FCC staffers and commissioners have publicly said they are skeptical of this reasoning.

Regulators in Illinois and Ohio also must approve the mergers. The two companies have already agreed to a more broad set of conditions in Ohio in order to win approval in that state.

 

 

SBC, Ameritech agree to merger conditions

By John Borland
Staff Writer, CNET News.com
February 23, 1999, 12:45 p.m. PT

Ohio consumer groups and state regulators have garnered promises from SBC Communications and Ameritech that are intended to keep phone rates low and help speed the rollout of high-speed Net services to poor neighborhoods.

The agreement moves the two companies a step closer to approval of their pending merger, which had been criticized by consumer advocates and the Public Utilities Commission in Ohio.

Today's settlement, which includes steep penalties if the two companies fail to fulfill their side of the deal, defuses much of that criticism, and makes state approval of the deal likely.

"We're very satisfied with the settlement," said Selim Bingol, a spokesman for SBC. "We think it's very good for consumers." The company had already planned to make many of the investments contained in the agreement, Bingol added.

The agreement--if approved by the Ohio Public Utilities Commission--marks the first round of conditions to be placed on the two companies' $73 billion deal.

Under the terms of the settlement, the two companies have agreed to keep the number of Ameritech jobs in Ohio at least as high as pre-merger levels for at least two years, and to keep the state's residential phone rate cap in place until 2002.

The companies also have agreed to enter four new Ohio local phone markets, where Ameritech currently does not operate. These will include Cincinnati, which is dominated by Cincinnati Bell, and several smaller markets served by GTE and other companies.

The merged company will lease its network to competitors at a discounted rate, well below that charged anywhere else in the country--opening the possibility for lower residential rates from alternative providers across the state.

Consumer groups also won provisions to guarantee the merged company will continues to invest in low-income areas.

The new agreement contains strict provisions that will ensure high-speed Internet services are rolled out in poor urban neighborhoods, at about the same pace as in more profitable areas.

"This is something we were very concerned about, since we know that telephone companies traditionally test these services in wealthy white neighborhoods," said Ellis Jacobs, an attorney for the Legal Aid Society of Dayton, which was representing a low-income urban neighborhood group involved in the negotiations.

The two companies also have committed more than $3 million to community technology programs designed to spread the use of computers and the Internet to poor neighborhoods.

Although today's agreement will smooth approval of the agreement in Ohio, the companies still face opposition in Illinois and at the federal level.

Several competitors, including Time Warner Telecom, dropped their opposition as a result of today's agreement. But long distance giants AT&T and Sprint plan to continue their campaign against the deal.

Ohio regulators are expected to make a final decision within 30 days. Regulators in Illinois, where staffers have also recommended imposing strict conditions on the merger, will likely make their ruling by the end of April.

SBC to buy Ameritech for $62 billion

by Bloomberg News Posted at 06:40 a.m. PDT; Monday, May 11, 1998

SAN ANTONIO - SBC Communications said it will acquire Ameritech for $62 billion in stock, creating the largest U.S. local telephone company, with customers from Ohio to California.

SBC will exchange 1.316 of its shares for each Ameritech share, valuing the Chicago Bell at $55.77 a share - 27 more than Friday's close of $43.875. SBC Chief Executive Ed Whitacre Jr. will be chairman and CEO of the combined company.

The acquisition is SBC's second purchase of a fellow Baby Bell in the two years since the landmark Telecommunications Act was passed to boost phone competition. The acquisition is the largest ever in the phone industry and gives SBC a strong international presence as well as cable-TV and security-monitoring.

"This is a colossal deal which will rock telecom to the core," said Jeffrey Kagan, president of market research firm Kagan Telecom Associates. "Merger mania might not be what the Telecom Act had in mind, but this is the path many local and long-distance companies are taking."

Since the federal government deregulated the $100 billion local-phone industry in February 1996, allowing long-distance and local companies to compete in each other's markets, SBC has been the most aggressive of the regional Bells to expand beyond its territory.

Last year, SBC completed its $16.5 billion acquisition of San Francisco-based Pacific Telesis Group. SBC expects to complete its $5.97 billion acquisition of Southern New England Telecommunications later this year.

SBC's purchase of Ameritech creates a company with annual profit of about $5.71 billion and revenue of about $41 billion. Ameritech had $7.02 billion in long-term debt at the end of the first quarter. The combined company would have 189,000 employees, 62 percent from SBC.

SBC has local phone operations in Texas, California, Nevada, Arkansas, Kansas, Missouri and Oklahoma, having gained California and Nevada from its purchase of Pacific Telesis.

Ameritech, with more than 12 million customers, operates in Illinois, Indiana, Ohio, Wisconsin and Michigan.

The new company will retain Ameritech's Chicago headquarters. The company's don't expect any new job cuts.

May 31, 2001

Government fines SBC Communications Inc.

SBC Communications Inc. paid the government another $3.87 million recently for again failing to meet performance targets agreed to as part of its purchase of Ameritech, news agency Reuters reported today.

San Antonio-based SBC made the payment May 19 to cover the three-month period from January to March, according to a filing with the Federal Communications Commission.

To date, the company has paid about $31.5 million since December for missing targets related to providing competitors with timely wholesale services such as unbundled network elements, failing to meet deadlines for installing services and notifying competitors when their orders were complete.

The most recent payment is less than the $4.36 million paid in April. The payments are triggered when the company fails to meet performance goals for three consecutive months or six of 12 months in a calendar year.

SBC acquired Ameritech in October 1999 in a $61 billion deal.

FCC Will O.K. SBC-Ameritech -- with Some Big Ifs
 
Despite tough talk from the Federal Communications Commission, SBC Communications Inc. is likely to get the nod from regulators to go ahead with its $84.2 billion merger with Ameritech Corp. as early as June. But SBC, one of the larger Baby Bells, and Ameritech will have to agree first to conditions to open up their monopoly local phone markets to competitors if they are to win a three-vote majority on the FCC.

The FCC's staff voiced major concerns about the merger at a May 6 public forum -- without discussing the conditions the agency is considering. But Business Week Online has learned from agency sources that before giving the green light, the FCC wants to require the companies to first get approval to enter the long-distance market in large states such as Texas, California, and Illinois. That approval would come only if the telcos satisfy those states that they've opened their local phone markets to competition. Under the 1996 Telecommunications Act, Bells must open their local markets before they can get into the long-distance business.

The FCC wants SBC and Ameritech to set up a computerized system so that competitors can easily order the local phone lines they need to start competing with the Bells. The commission may also adopt rules devised by state regulators in Texas and Illinois to impose fines on the merged, new company if it reneges on promises to open markets.

ONE LESS COMPETITOR. At the May 6 meeting, FCC Director of Research Tom Krattenmaker blasted SBC and Ameritech for claiming there's "nothing wrong with reassembling the old phone system." He also said the combination could harm the public interest by removing each company as a potential competitor to the other in local phone service. And the companies' insistence that they merge before launching service in 30 local phone markets outside their territory makes little sense when companies much smaller than SBC-Ameritech have successfully competed in those markets, he said.

Despite the commission staff's harsh tones, FCC Chairman William E. Kennard is more optimistic about the procompetitive benefits of the deal, according to agency sources. And with the right conditions to safeguard local phone competition, he and at least two other colleagues would be willing to approve the merger, these sources say. But if SBC and Ameritech refuse to accept adequate conditions, the FCC could still block the deal.