The California Public Utilities Commission (PUC) on Friday approved two giant telecommunications mergers, allowing SBC Communications Inc. to complete its acquisition of long-time rival AT&T Corp.
The California Public Utilities Commission Friday approved two giant telecommunications mergers, allowing SBC to complete its acquisition of long-time rival AT&T .
The PUC’s also approved Verizon’s acquisition of MCI , but Verizon still needs approval from a handful of states. Verizon officials said Friday they expect the merger to be completed in December or January.
The merged SBC and AT&T, now called AT&T Inc., will be the largest provider of data services to Fortune 1000 companies, the company said in a press release. The new AT&T would have had combined annual revenue of about $72 billion in 2004, larger than all but 13 companies on the Fortune 500 list of the largest U.S. companies. The combined revenue of Verizon and MCI in 2004 was more than $94 billion.
“We are ready to meet the needs of a new generation of customers in a new era of communications and entertainment,” Edward Whitacre Jr., chairman and CEO of the new AT&T, said in a statement. “The combination of SBC and AT&T companies gives us the local, global and wireless network resources and the expertise to set the standard for delivering meaningful innovations and making the promise of integrated communications and entertainment a reality for consumers and businesses.”
The California agency’s approvals come about three weeks after the FCC approved the two mergers with some conditions. The U.S. Department of Justice also approved the mergers with conditions in late October .
As part of the California approval, both companies will roll out stand-alone DSL broadband service, allowing customers to purchase DSL without also buying their traditional telephone service. Consumer groups and some competitors of Verizon and SBC have pushed for so-called naked DSL requirements, saying stand-alone DSL will allow customers to chose independent VoIP service instead of voice service from the telecom giants. VoIP service needs a broadband connection to work.
Verizon will also contribute $15 million to California’s efforts to deploy broadband services statewide, and Verizon will increase its charitable giving in California by $20 million over the next five years, the company said. SBC will contribute $45 million toward the California Emerging Technology Fund’s broadband rollout efforts, and increase its charitable giving in California by $47 million over the next five years, according to the PUC.
“These new entities will be strong competitors in the global telecommunications market, and California consumers stand to benefit,” PUC President Michael Peevey said in a statement. “With the added commitment by these companies to ensure access to broadband and advanced services in underserved communities, these mergers will bring billions of dollars in investment and new technologies to California consumers.”
SBC announced in January a plan to acquire AT&T in a stock deal worth about $16 billion. After a bidding war starting in February, MCI’s board in May approved a bid of about $8.4 billion from Verizon, spurning offers from rival carrier Qwest.
SBC and Verizon are two of the four remaining regional Bells split off from the old AT&T when the U.S. government forced a breakup of the monopoly in the mid-1980s. Parent company AT&T has struggled to compete in a world where the regional Bells were able to offer a package of local and long-distance voice service, plus broadband, to customers.
“This merger of SBC and AT&T, and the coming merger of Verizon with MCI are big, big news in the telecom industry,” said Jeff Kagan, an independent telecom analyst. “The local companies have won that war and are acquiring the long distance giants.”
The mergers will give SBC and Verizon a national reach for business customers, a “weak spot” for them in the past when they were regional companies, Kagan added.
“This move changes the balance of power in telecom,” he said. “SBC is no longer just a regional phone company. Neither is Verizon once they merge with MCI. This creates a national competitor, instead of a regional one.”
