Creates National and Global Competitor:
A New Kind of Telecommunications Company
MEDIA CALL: 9:30 a.m. EDT Monday, May 11. Call-in number is
1-800-967-7184.
MATERIALS ON-LINE: Press materials at http://www.sbc.com/Media/
(Case-Sensitive URL).
SAN ANTONIO, May 11 /PRNewswire/ -- SBC Communications Inc. (NYSE: SBC)
and Ameritech Corporation (NYSE: AIT) have agreed to a $62 billion,
industry-transforming merger that will create a new type of telecommunications
company with a "national-local" focus combined with national and international
service capabilities. The company will have the assets, scope and strategies
to compete against incumbent local telecommunications companies, competitive
local exchange carriers, long distance companies and global competitors.
"The merger will enable the new SBC to accelerate and expand
telecommunications competition by entering 30 U.S. markets outside its
traditional 13-state local region (see attached list) so that the combined
company will serve customers in all the top 50 markets in the nation. In
addition, the new company will build on its growing international presence to
serve a worldwide market. We will provide a competitive, integrated mix of
local, long distance, Internet and high-speed data services providing more
choices, new and improved services, more competitive prices and more
convenience for millions of consumers, giving us the opportunity to create
significant value for our shareowners," said Edward E. Whitacre Jr., chairman
and chief executive officer of SBC.
"This transaction will allow us to implement a 'national-local' strategy
in which we will offer local services across the country in combination with
major national and international operations," Whitacre added. "It will
transform us from a regional company to a new kind of company that uses its
premiere networks to focus on 'national-local' and global markets. We will
then be positioned to compete head-to-head with incumbent local telephone
companies, competitive local exchange carriers (CLECs), data networks, long
distance carriers and global competitors."
"We know we have the people, resources and the ability to make our new
company an unqualified success for our customers, our employees, and our
shareholders. We leap forward in terms of our ability to invest in new
technology and become a leading player in the global marketplace," said
Richard C. Notebaert, chairman and chief executive officer of Ameritech.
Ameritech shareholders will receive a fixed exchange ratio of 1.316 SBC
shares for each share of Ameritech. Based upon closing prices as of May 8,
after adjusting for the exchange ratio, the combined companies' value is
$146 billion. The transaction will be a tax free, stock-for-stock exchange
and will be accounted for as a pooling of interests. The combined company
will be called SBC and will be approximately 56% owned by SBC's existing
shareowners and 44% by Ameritech's existing shareowners (ownership percentages
are prior to SBC completing its merger with SNET).
"The Telecommunications Act of 1996 helped open the door to a period of
rapid change in the telecommunications industry. But so far, it has not
created the level of competition that many expected," said Notebaert.
"This merger is critical because it transforms us into a company that has
the size, scope and incentive to make the promise of the Act a reality. This
new company will be in the best position to serve our customers in the
evolving marketplace. We expect to see, in the next few years, the emergence
of integrated national and international operators. Successful carriers will
either be part of this group or more narrowly focused niche players. Our
combined company intends to be one of the successful global operators," said
Notebaert.
"This merger should be viewed as a welcomed development by regulators,"
said Whitacre. "If they are looking for a truly potent way to jump start
competition, then approving this merger should be a clear decision."
"We are going to take advantage of the best employee team, the best
customer service, and the best technology around," said Whitacre.
The executives noted several benefits of the merger at the announcement:
-- Consumers and businesses, large and small, in markets such as New
York, Baltimore/Washington, Boston, Atlanta, Denver, Philadelphia,
Miami, Phoenix and Seattle will benefit from a new major alternative
for all their telecommunications needs, one brought to them by a
company with local exchange experience, marketing experience and
advanced technology products. The new company will pursue multiple
market entry strategies that include building, acquiring and
partnering.
-- Customers in the 13-state region already served by SBC and Ameritech
-- which include half of the Fortune 500 companies -- will enjoy the
best and most competitively priced product offerings and services of
each company.
-- The new company will be able to serve customers in all the top 50 U.S.
markets, increasing the potential customer base to 180 million people.
-- Local competition in the 13-state region will be advanced as SBC and
Ameritech, the recognized leaders in interconnection technology,
create a uniform standard of technical excellence for operational
support systems available to competitors. The new company will
deliver products and services more efficiently to retail and wholesale
customers, enhancing competition in the 13-state region.
-- The merged company's combined international assets, which include
operations in 19 countries in Europe, Asia, Africa, North America
and South America, coupled with its integrated services, will allow
it to follow customers wherever they go.
The combination will also result in significant opportunities for revenue
growth, technology development, cost synergies and other benefits. "We expect
to optimize costs through increased economies of scale and scope, the
elimination of duplicated expenditures and the adoption of best practices in
cost control," said Whitacre. "We expect to grow revenues more rapidly than
would have been possible independently both in our existing service areas and
in new markets. These synergies can be used to integrate our two companies,
improve our operations, benefit our customers and fund expansion.
"The experience and knowledge we have gained from the very successful
integration of Pacific Telesis makes us very confident about our ability to
realize the potential financial and strategic benefits of the combination with
Ameritech. Going forward the transaction and strategy announced today will
diversify our sources of earnings and establish a platform for sustainable
future growth," Whitacre continued.
The anticipated cost synergies resulting from the merger will not result
in any net job reductions in the combined company. As a result of growth in
existing lines of business, out-of-region expansion and new opportunities in
data, long distance and other new services, the total number of employees is
expected to rise over the next few years.
In fact, SBC made a commitment to Ameritech that employment levels in the
five-state region will not be reduced due to the transaction, as well as to:
-- maintain Ameritech's headquarters in Chicago and its state
headquarters in its traditional states of Illinois, Indiana, Michigan,
Ohio and Wisconsin;
-- continue to use the Ameritech name in each of its operating states;
-- continue to support economic development and education in
Ameritech's region consistent with its well-established commitment;
and
-- continue Ameritech's historic levels of charitable contributions and
community activities.
After the transaction is completed, Whitacre will remain as chairman and
chief executive officer of SBC. Notebaert will remain as chairman and chief
executive officer of Ameritech. Upon closing of the merger, SBC's board of
directors will be expanded to include Notebaert and four other current
Ameritech directors.
The merger is subject to shareholder and regulatory approvals. Since
federal law prohibits ownership of overlapping wireless licenses, the
companies will divest certain cellular properties. "Given the size and
significance of the transaction we expect close scrutiny but ultimate approval
from regulatory authorities," said Whitacre. "Obviously, given the paradigm
shifting potential of this merger and the rapid changes in our business, the
sooner we can deliver the benefits of this merger to consumers, the better.
We recognize that we need the support of regulators for this transaction to be
approved. We are committed to listening to any concerns they might raise, and
to working with them to promptly resolve any issues. We anticipate the
transaction closing within a year," he continued.
Salomon Smith Barney acted as the financial advisor to SBC Communications
on the transaction. Goldman Sachs & Co. advised Ameritech.
SBC Communications Inc. is a global leader in the telecommunications
industry, with nearly 34 million access lines and over 5.6 million wireless
customers across the United States, as well as investments in
telecommunications businesses in 10 countries. Under the Southwestern Bell,
Pacific Bell, Nevada Bell and Cellular One brands, SBC, through its
subsidiaries, offers a wide range of innovative services, including local and
long-distance telephone service, wireless communications, paging, Internet
access, and messaging, as well as telecommunications equipment, and directory
advertising and publishing. SBC ( http://www.sbc.com ) has more than
118,000 employees and reported 1997 revenues of $25 billion. SBC's equity
market value of $80 billion as of March 31, 1998, ranks it as one of the
largest telecommunications companies in the world.
Ameritech serves millions of customers in 50 states and 40 countries.
Ameritech provides a full range of communications services, including local
and long distance telephone, cellular, paging, security services, cable TV,
Internet service and more. One of the world's 100 largest companies,
Ameritech ( http://www.ameritech.com ) has 73,000 employees, 1 million shareowners
and nearly $28 billion in assets.
New Markets for the New SBC
Below are the markets where the new SBC plans to compete under the
"National-Local" strategy, ranked by size.
1. New York
2. Philadelphia
3. Boston
4. Washington
5. Miami-Ft. Lauderdale
6. Atlanta
7. Minneapolis - St. Paul
8. Phoenix
9. Baltimore
10. Seattle-Everett
11. Denver - Boulder
12. Pittsburgh
13. Tampa - St. Petersburg
14. Portland
15. Cincinnati
16. Salt Lake City - Ogden
17. Orlando
18. Buffalo
19. New Orleans
20. Nashville - Davidson
21. Memphis
22. Las Vegas
23. Norfolk - Virginia Beach
24. Rochester
25. Greensboro - Winston - Salem
26. Louisville
27. Birmingham
28. Honolulu
29. Providence - Warwick
30. Albany - Schenectady - Troy
Below are the markets in which SBC and Ameritech currently offer
services, ranked by size:
1. Los Angeles (SBC)
2. Chicago (AIT)
3. Detroit (AIT)
4. Dallas-Ft. Worth (SBC)
5. Houston (SBC)
6. San Francisco/Oakland (SBC)
7. San Diego (SBC)
8. St. Louis (SBC)
9. Cleveland (AIT)
10. San Jose (SBC)
11. Kansas City (SBC)
12. Sacramento (SBC)
13. Milwaukee (AIT)
14. San Antonio (SBC)
15. Indianapolis (AIT)
16. Columbus, OH (AIT)
17. Hartford/New Britain (SBC)
18. Oklahoma City (SBC)
19. Austin (SBC)
20. Dayton (AIT)
FACT SHEET
TERMS OF THE MERGER AGREEMENT
OVERVIEW The transaction will be a tax-free, stock-for-stock merger,
with pooling-of-interest accounting.
EXCHANGE Under a fixed exchange ratio, shareowners of Ameritech will
RATIO receive 1.316 shares of SBC common stock for each of their
shares. Based on the value of SBC's closing stock price on
May 8, 1998 of $42-3/8, this will represent a value of
approximately $55.77 for each Ameritech share.
VALUATION The purchase represents approximately a 27 percent premium
to Ameritech's closing price on May 8, 1998, of $43-7/8 per
share. The merger gives Ameritech a total equity value of
$62 billion and an enterprise value, including debt, of
$71 billion.
OWNERSHIP Pro forma, the combined company, on a pre-SNET merger
completion basis, will be owned 56 percent by SBC
shareowners and 44 percent by Ameritech shareowners.
TIMING SBC and Ameritech hope to complete the merger within a
year. The merger must be approved by the Public Utilities
Commissions in Ameritech's regions, other local regulators
and the Federal Communications Commission. The United
States Department of Justice will review the transaction to
determine if there are any anti-trust issues. Some European
countries will conduct their own reviews.
NO-SHOP Under provisions of the merger agreement, Ameritech may not
PROVISIONS solicit other potential acquirers.
SOURCE SBC Communications Inc.
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Related links:
http://www.ameritech.com
CONTACT:
Larry Solomon of SBC Communications,
210-351-3990, Fax: 210-351-2903, or Internet:
solomonl@corp.sbc.com; or George Stenitzer of Ameritech,
312-609-6166, Fax: 312-207-0999, or Internet:
george.i.stenitzer@ameritech.com
EDITOR'S ADVISORY: MEDIA CALL: 9: 30 a.m. EDT Monday, May 11.
Call-in number is 1-800-967-7184. MATERIALS ON-LINE: Press
materials at http://www.sbc.com/Media
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