Cingular nabs AT&T Wireless for $41B
Venture outbids Vodafone with offer of $15 a share; better coverage, new services promised.
February 17, 2004: 9:45 AM EST
NEW YORK (CNN/Money) - Cingular Wireless said Tuesday it agreed to buy AT&T Wireless Services Inc. for about $41 billion, topping a rival $38 billion bid from Vodafone of Britain, in a deal that would create the nation's biggest mobile phone company.
Cingular, currently the nation's No. 2 cellular service provider, is paying about a 27 percent premium to shareholders of AT&T Wireless, the nation's No. 3 wireless phone provider.
The deal would make Cingular the largest wireless carrier, ahead of Verizon Wireless, with about 46 million subscribers.
The two companies say the merger will let them offer better service in 97 of the top 100 U.S. markets. In addition, the two companies said they will be in a better position to build more advanced data networks and roll out new services for customers. This is key since Verizon Wireless announced plans last month to build a new high-speed data network.
Both Cingular and AT&T Wireless have networks that run on the global system for mobile communications (GSM) standard, the same standard that most networks in Europe are run on.
Cingular, jointly owned by Baby Bells SBC Communications Inc. and BellSouth Corp., said SBC will contribute about $25 billion and BellSouth will pay $16 billion for AT&T Wireless.
"This is great news for America's wireless users," Cingular Wireless CEO Stan Sigman said in a statement. "By combining the strengths of these two companies we expect to accelerate the availability of advanced wireless services for consumers."
Cingular said combining the two companies should provide $1 billion in savings by 2006 and more than twice that in starting in 2007.
But both SBC and BellSouth expect to see some reduction in their earnings per share in 2005 and 2006 because of the deal, though Cingular did not give details of the earnings hit to be taken by its parent companies. It said that SBC should see a positive impact on earnings per share by 2007 and that BellSouth should have an earnings lift by 2008.
Shares of AT&T Wireless jumped $2.08, or about 18 percent, to $13.90 in before-hours trading on Instinet. Shares of SBC and BellSouth had not yet traded on Instinet.
"Today's announcement is a triple win for AT&T Wireless shareowners, customers and employees," AT&T Wireless CEO John Zeglis said the joint statement.
The joint statement did not give details about the staffing level of the combined company. Nor did it say what the name of the new company will be. Cingular's Sigman will be the head of the combined company.
Officials at Cingular were not immediately available for comment early Tuesday.
Under Cingular's bid, equal to $15 a share, the company will also take on about $6 billion in debt, giving a total value of nearly $47 billion to the deal, according to Cingular.
Over the weekend, Vodafone raised its bid for AT&T Wireless to $38 billion, or $14 a share, to match an earlier bid by Atlanta-based Cingular. Vodafone, the world's largest wireless phone provider, owns a 45 percent stake in Verizon Wireless, with Verizon Communications Inc.
Vodafone shares rose 7 percent in London trading as investors were relieved that it wouldn't be taking the earnings hit of an acquisition.
"On 17 February 2004, Vodafone withdrew from the auction when it concluded that it was no longer in its shareholders' best interests to continue discussions," the company said in a statement.
"Vodafone remains committed to its existing position in the U.S. market with its successful partnership in Verizon Wireless," it added.
