SBC completes purchase of Pacific Telesis $16.5 billion deal creates 2nd largest U.S. phone company

April 02, 1997|By BLOOMBERG NEWS

SAN ANTONIO -- SBC Communications Inc. completed its $16.5 billion purchase of Pacific Telesis Group, capping the first acquisition among Baby Bells and creating the second largest U.S. phone company behind AT&T Corp.

The combined SBC-Pacific Telesis has the largest share of the local phone market in California and Texas, the most populous states. The company will retain the SBC name and be based in San Antonio.

The new SBC plans to enter the long-distance market this year and aims to provide customers with all of their phone and data needs on one bill -- from traditional calling to wireless and Internet access. It also has a strong international presence, with gateways to Mexico and Asia.

"They have tremendous potential to capitalize on their proximity to the Mexican market," said Eric Paulak, an analyst at Gartner Group.

"They also have international links to the Far East, where you have the fastest growing routes for international traffic."

The companies said 20 percent of all calls to Asia and half of the calls to Mexico originate in its local markets.

The acquisition is the third largest in U.S. history, behind Kohlberg Kravis Roberts' purchase of RJR Nabisco and Walt Disney Co.'s purchase of Capital Cities/ABC. It gives SBC a jump on Bell Atlantic Corp.'s planned $23 billion purchase of Nynex Corp.

Although New York regulators approved that sale last month, the companies are waiting for the Justice Department and Federal Communications Commission to act and recently said they couldn't predict when that would be.

Completion of the PacTel sale comes a day after California regulators approved the acquisition and ordered the companies to pay customers $248 million in refunds over five years.

As part of its pledge to regulators, SBC will add 3,000 jobs this year and another 1,000 over the next two years, mainly from new businesses such as Internet and wireless, the companies said.

SBC also is looking to open offices in California, possibly in Los Angeles or San Diego, said Phil Quigley, former chairman and chief executive of Pacific Telesis. He is now vice chairman of SBC and will continue to oversee California operations.

Edward Whitacre, chairman and chief executive officer of SBC, retains those titles at the combined company.

The new SBC has 110,000 employees and annual sales of $23.5 billion, cash flow of $10 billion, net income of $3 billion and a market value of more than $47.9 billion.

SBC will provide local phone service on 31 million phone lines and wireless services in markets with a population of more than 87 million.

Internationally, it has operations in Mexico, Chile, South Korea, Taiwan, France, South Africa and Israel.

SBC shares rose 37.5 cents to $52.875 yesterday.

Pub Date: 4/02/97

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