RNS No 2289e
SBC COMMUNICATIONS INC
11th May 1998
For More Information SBC Communications Ameritech
Kathy Dowling/Investor Relations Sari Macrie/Investor Relations
Tel: 210-351-2100 Tel: 312-750-5350
Media: Larry Solomon Media: George Stenitzer
Tel: 210-351-3990 Tel: 312-609-6166
SBC Communications and Ameritech to Merge Creates National Global Competitor:
A New Kind of Telecommunications Company Analyst Call:9.00 am EDT Monday. May 11. Call-in number: 800-946-0712
International calls: 719-457-2641
Materials On-Line: Press materials a http://www.sbc.com/Media/(Case-Sensitive
URL) SAN ANTONIO (May 11, 1998)-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 telecommnications
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 term 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's
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 customers 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 for
customers. This new company will be in the best position to sustain long term,
high quality, double digit growth. 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." "This merger creates 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.
* The merger is expected to achieve a goal of generating $2.5 billion in
pre-tax merger benefits.
* Consumers and businesses, large and small, in markets such as New York. Baltimore/Washington, Boston, Atlanta, Denver, Miami. Philadelphia. 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 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 competing local exchange carriers. The new company will
deliver products and services more efficiently to retail and wholesale
customers, enhancing competition in the 13-state region.
* The new 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. We expect the combination of the transaction and anticipated
synergies to be dilutive to our anticipated earnings per share in 2000 and
2001--by approximately 7% and 3% respectively--and accretive in 2002. 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 owership 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 Communication 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
(www.sbc.com) has more than 118,000 employees and reported 1997 revenues of $25
billion. SBC's equity market value of $80 billon 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, Armeritech
(www.ameritech.com) has 73,000 employees, 1 million shareowners and nearly $28
billion in assets.
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