RNS Number:3161Z
Bellsouth Corp
05 March 2006
Note: AT&T Inc. will hold an analyst conference call to discuss the merger that
will be broadcast live via the Internet at 10 a.m. EST on Monday, March 6, 2006,
at www.att.com/investor.relations or http://www.bellsouth.com/investor.
For More Information:
BellSouth AT&T AT&T
Joe Chandler Michael Coe Walt Sharp
404-312-1964 212-453-2198 210-351-3349
AT&T, BELLSOUTH TO MERGE
Combination Will Speed Innovation, Competition and Convergence
* Natural combination of two leading wireline providers and joint
owners of Cingular speeds progress in integrated wireless/wireline services
* Substantial financial benefits for stockholders of both companies;
an expected net present value of $18 billion in synergies resulting from a more
than $2 billion annual run rate in synergies expected in 2008, growing to $3
billion in 2010
* Expect merger to be accretive to AT&T adjusted earnings per share in
2008, double-digit adjusted EPS growth in each of next three years (earnings
adjusted for merger integration costs and amortization of intangibles) and
significant growth in free cash flow after dividends in 2007 and 2008
* AT&T's board authorizes share repurchase of 400 million shares by
end of 2008; buy back of at least $10 billion in shares over next 22 months
planned, with the majority in 2007
* Merger will benefit customers and promote competition
SAN ANTONIO and ATLANTA (March 5, 2006)-AT&T Inc. (NYSE:T) and BellSouth
Corporation (NYSE:BLS) announced today an agreement to merge the two companies,
a combination that will create a more effective and efficient provider in the
wireless, broadband, video, voice and data markets.
The merger will streamline the ownership and operations of Cingular
Wireless, which is jointly owned by AT&T and BellSouth. The new company will be
more innovative, nimble and efficient, providing benefits to customers by
combining the Cingular, BellSouth and AT&T networks into a single fully
integrated wireless and wireline Internet Protocol network offering a full range
of advanced solutions.
As a result, the combined company will be better able to speed the
convergence of new and improved services for consumers and businesses, and
embrace the industry's shift to Internet Protocol network-based technologies.
"Logical Next Step That Creates Substantial Value"
"This merger is a logical next step that creates substantial value for customers
and stockholders of both AT&T and BellSouth," said AT&T Chairman and CEO Edward
E. Whitacre Jr. "It will benefit customers through new services and expanded
service capabilities. It will strengthen Cingular through unified ownership and
a single brand. And we are confident that this is a merger we can execute,
based on our track record with previous integrations and our experience working
closely with BellSouth to create and build Cingular Wireless, and operate
Yellowpages.com.
"This transaction combines two solid, very well-run companies," Whitacre added.
"BellSouth operates in an attractive region with a growing economy. It has
great employees and an outstanding network, with fiber optics deeply deployed in
its service area. It has a strong record in terms of customer service and a
sound, conservative balance sheet. These strengths, added to those of AT&T, will
improve our ability to provide innovative services to more customers while
returning substantial value to our owners and improving our growth profile."
"Technology changes and convergence are shaping a new competitive dynamic and
creating tremendous opportunity," said Duane Ackerman, chairman and CEO of
BellSouth. "We're creating a company with much better capabilities to seize
these opportunities while maintaining its strong focus on customer service and
community involvement.
"This was the right time for this merger," said Ackerman. "This combination is
good for our employees, our customers and our stockholders."
AT&T has committed to continue BellSouth's historic levels of charitable
contributions and community activities, including the continued funding of
charitable activities and economic development and education initiatives
throughout BellSouth's nine-state area.
"Our focus is on providing great service and innovative, competitively priced
products for consumers and businesses throughout the Southeast, the nation and
the world," said Whitacre. "Together, we will lead the way into a new era of
converged and bundled communications, video and entertainment services while
also improving our ability to manage complex networks."
Customer Benefits
Consumers seeking a real alternative to cable monopolies should see faster and
more economical deployment of next-generation IP television networks and similar
services as a result of AT&T's groundbreaking entry into IPTV and the
unparalleled research and development work at AT&T Labs, coupled with
BellSouth's extensive deployment of fiber networks for DSL and other broadband
services.
Business customers in the southeastern United States and the rest of the country
stand to benefit from the expertise and innovation of AT&T Labs, as well as the
combination of AT&T's state-of-the-art national and international networks and
advanced services with BellSouth's local exchange and broadband distribution
platforms and expertise.
The combined company will have greater financial, technical, research and
development, network and marketing resources to better serve consumers and
large-business customers, and will accelerate the introduction of new and
improved product and service sets for those customers.
The merger would also give business and government customers,
including military and national security agencies, a reliable U.S.-based
provider of integrated, secure, high-quality and competitively priced services
to meet their needs anywhere in the world.
Since AT&T and BellSouth are not actual competitors in the local,
long distance and video markets, and because BellSouth is not a significant
competitor with AT&T in the enterprise market, the merger will not reduce
competition in any of those markets.
Terms and Conditions
Under terms of the agreement, approved by the boards of directors of both
companies, shareholders of BellSouth will receive 1.325 shares of AT&T common
stock for each common share of BellSouth. Based on AT&T's closing stock price on
March 3, 2006, this exchange ratio equals $37.09 per BellSouth common share.
This represents a 17.9 percent premium over BellSouth's closing stock price on
March 3, 2006, and a total equity consideration currently valued at
approximately $67 billion.
The merger, which is subject to approval by shareholders of both companies, as
well as regulatory authorities and to other customary closing conditions, is
expected to close within approximately 12 months.
Making the Most of Wireless
One of the most immediate benefits of the transaction will be to streamline and
enhance management and operations at Cingular.
"The Cingular partnership and the company itself are performing extremely well,
particularly after the AT&T Wireless acquisition," said Whitacre. "But no
partnership between two independent companies, no matter how well run, can match
the speed, effectiveness, responsiveness and efficiency of a solely owned
company."
While the majority of Cingular's operations will remain unchanged, simplifying
the ownership structure will lead to more efficient marketing and service
provisioning, which will come under a single AT&T brand, generating further
financial synergies and customer benefits.
The merger will also allow for closer integration of the company's wireless,
wireline, and IP products and services over a single global IP network. This is
critical as the industry moves forward with convergence of the "three screens"
that many consumers rely on most today - televisions, computers and wireless
devices. It is an area in which AT&T is a leader through its strategic
partnerships with Yahoo!(R) and others.
"We are excited about the potential for bringing a robust set of integrated
products and services to our customers in a faster and more effective manner
under one brand," said Ackerman.
Financial Expectations
In addition to the numerous customer benefits, AT&T and BellSouth expect the
proposed transaction to yield substantial benefits for stockholders of both
companies.
The merger combines three companies that currently operate separately and
independently: AT&T, BellSouth and Cingular Wireless. AT&T and BellSouth
estimate that synergies from the combination will ramp quickly to reach an
annual run rate exceeding $2 billion in the second year after closing, and
estimate the net present value of expected synergies at nearly $18 billion.
A substantial portion of synergies are expected to come from reduced costs in
the operations of unregulated and interstate services, and corporate staff, and
the synergies are over and above expected productivity improvements from the
companies' ongoing initiatives. Approximately half of the total cost savings are
expected to come from network operations and IT, as facilities and operations
are consolidated and traffic is moved to a single IP network. Additional savings
are expected to come from combining staff functions and from reduced ongoing
advertising and branding expenses. Currently, the three companies support three
distinct brands with three separate advertising campaigns. Following the merger,
they expect to move to a single brand: AT&T.
AT&T expects the transaction to be adjusted earnings-per-share neutral in 2007
and have a positive impact on its adjusted earnings per share thereafter
(adjusted earnings per share exclude all merger integration costs and non-cash
expenses for amortization of intangibles). AT&T expects that the merger will
reinforce the guidance it provided at its Jan. 31, 2006, analyst conference.
* There is no change to AT&T's 2006 outlook.
* AT&T continues to expect double-digit adjusted EPS growth in each of
the next three years with significant growth in free cash flow after dividends.
Free cash flow after dividends is expected to exceed $4 billion in 2007 and
exceed $6 billion in 2008.
* Total revenues, including Cingular, are expected to return to growth
in 2007, a year earlier than previous guidance.
* Capital expenditures, including Cingular, are expected to be in the
mid teens as a percentage of revenues in 2007 and 2008.
* The transaction also is expected to improve AT&T's overall growth
profile - driven by wireless, which will represent about one-third of the
combined company's expected revenues in 2007, and by expanded opportunities in
business markets.
* AT&T expects free cash flow after dividends from the combined
company to provide the flexibility to continue reducing debt levels over the
next five years while providing excellent cash returns to stockholders.
AT&T and BellSouth expect that the combined company will have a strong balance
sheet with solid credit metrics. Both companies have single A credit ratings.
Expanded Share Repurchase
AT&T's board of directors has approved an expanded share repurchase
authorization of 400 million shares through 2008, replacing the existing
program. Under this authorization, the company expects to buy back at least $10
billion of its common shares over the next 22 months. It expects at least $2
billion in repurchases during 2006, consistent with its previous guidance, and
an additional $8 billion in repurchases in 2007. This repurchase authorization
is intended to approximate the share premium paid to BellSouth stockholders as
part of this merger transaction. The timing and nature of these repurchases will
depend on market conditions and applicable securities laws.
New Company Leadership
Mr. Whitacre will serve as chairman, CEO and a member of the board of
directors of the combined company. Mr. Ackerman will serve as chairman and CEO
of BellSouth operations for a transition period following the merger.
Additionally, three members of BellSouth's board of directors will join the AT&T
board.
The corporate headquarters for the combined company will remain in San Antonio.
Cingular's headquarters will remain in Atlanta, as will the combined company's
Southeast regional telephone company headquarters.
About AT&T
AT&T Inc. is one of the world's largest telecommunications holding companies and
is the largest in the United States. Operating globally under the AT&T brand, AT
&T companies are recognized as the leading worldwide providers of IP-based
communications services to business and as leading U.S. providers of high-speed
DSL Internet, local and long distance voice, and directory publishing and
advertising services. AT&T Inc. holds a 60 percent ownership interest in
Cingular Wireless, which is the No. 1 U.S. wireless services provider with more
than 54 million wireless customers. Additional information about AT&T Inc. and
AT&T products and services is available at www.ATT.com.
About BellSouth
BellSouth Corporation is a Fortune 100 communications company headquartered in
Atlanta, Georgia. BellSouth has joint control and 40 percent ownership of
Cingular Wireless, the nation's largest wireless voice and data provider with
54.1 million customers. Backed by award-winning customer service, BellSouth
offers the most comprehensive and innovative package of voice and data services
available in the market. Through BellSouth Answers(R), residential and small
business customers can bundle their local and long distance service with dial-up
and high-speed DSL Internet access, satellite television and Cingular(R)
Wireless service. For businesses, BellSouth provides secure, reliable local and
long distance voice and data networking solutions. BellSouth also offers print
and online directory advertising through The Real Yellow Pages(R) and
YELLOWPAGES.COM(TM)from BellSouth.
BellSouth believes that diversity and fostering an inclusive environment are
critical in maintaining a competitive advantage in today's global marketplace.
More information about BellSouth can be found at
http://www.bellsouth.com/. And investor information can be found at
http://www.bellsouth.com/investor.
Cautionary Language Concerning Forward-Looking Statements
We have included or incorporated by reference in this document financial
estimates and other forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These estimates and statements are
subject to risks and uncertainties, and actual results might differ materially
from these estimates and statements. Such estimates and statements include, but
are not limited to, statements about the benefits of the merger, including
future financial and operating results, the combined company's plans,
objectives, expectations and intentions, and other statements that are not
historical facts. Such statements are based upon the current beliefs and
expectations of the management of AT&T Inc. and BellSouth Corporation and are
subject to significant risks and uncertainties and outside of our control.
The following factors, among others, could cause actual results to differ from
those described in the forward-looking statements in this document: the ability
to obtain governmental approvals of the merger on the proposed terms and
schedule; the failure of AT&T shareholders to approve the issuance of AT&T
common shares or the failure of BellSouth shareholders to approve the merger;
the risk that the businesses of AT&T and BellSouth will not be integrated
successfully or as quickly as expected; the risk that the cost savings and any
other synergies from the merger, including any savings and other synergies
relating to the resulting sole ownership of Cingular Wireless LLC may not be
fully realized or may take longer to realize than expected; disruption from the
merger making it more difficult to maintain relationships with customers,
employees or suppliers; and competition and its effect on pricing, spending,
third-party relationships and revenues. Additional factors that may affect
future results are contained in AT&T's, BellSouth's, and Cingular Wireless
LLC's filings with the Securities and Exchange Commission ("SEC"), which are
available at the SEC's Web site (http://www.sec.gov). Neither AT&T nor
BellSouth is under any obligation, and expressly disclaim any obligation, to
update, alter or otherwise revise any forward-looking statement, whether written
or oral, that may be made from time to time, whether as a result of new
information, future events or otherwise.
NOTE: In connection with the proposed merger, AT&T intends to file a
registration statement on Form S-4, including a joint proxy statement/prospectus
of AT&T and BellSouth, and AT&T and BellSouth will file other materials with the
Securities and Exchange Commission (the "SEC"). Investors are urged to read the
registration statement, including the joint proxy statement (and all amendments
and supplements to it) and other materials when they become available because
they contain important information. Investors will be able to obtain free copies
of the registration statement and joint proxy statement, when they become
available, as well as other filings containing information about AT&T and
BellSouth, without charge, at the SEC's Web site (www.sec.gov). Copies of AT&
T's filings may also be obtained without charge from AT&T at AT&T's Web site
(www.att.com) or by directing a request to AT&T Inc. Stockholder Services, 175
E. Houston, San Antonio, Texas 78258. Copies of BellSouth's filings may be
obtained without charge from BellSouth at BellSouth's Web site
(www.bellsouth.com) or by directing a request to BellSouth at Investor
Relations, 1155 Peachtree Street, N.E., Atlanta, Georgia 30309.
AT&T, BellSouth and their respective directors and executive officers and other
members of management and employees are potential participants in the
solicitation of proxies in respect of the proposed merger. Information
regarding AT&T's directors and executive officers is available in AT&T's 2005
Annual Report on Form 10-K filed with the SEC on March 1, 2006 and AT&T's
preliminary proxy statement for its 2006 annual meeting of stockholders, filed
with the SEC on February 10, 2006, and information regarding BellSouth's
directors and executive officers is available in BellSouth's 2005 Annual Report
on Form 10-K filed with the SEC on February 28, 2006 and BellSouth's proxy
statement for its 2006 annual meeting of shareholders, filed with the SEC on
March 3, 2006. Additional information regarding the interests of such potential
participants will be included in the registration statement and joint proxy
statement, and the other relevant documents filed with the SEC when they become
available.
(c) 2006 AT&T Knowledge Ventures. All rights reserved. Subsidiaries and
affiliates of AT&T Inc. provide products and services under the AT&T brand.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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