Sbc To Adopt At&t Name

Justice Dept. Oks Mergers

Verizon's acquisition of MCI also wins green light

FCC likely to approve both deals as early as today

October 28, 2005|By MIKE HUGHLETT | MIKE HUGHLETT,CHICAGO TRIBUNE

CHICAGO -- With its purchase of AT&T Corp. nearing final approval, SBC Communications Inc. said yesterday that it will adopt the AT&T name, a brand steeped in historic glory but one that also carries some baggage.

San Antonio-based SBC, one of the nation's largest phone companies, is buying long-distance provider AT&T in a $16 billion deal that was approved yesterday by the Justice Department, which also gave its blessing to Verizon Communications Inc.'s $8.44 billion purchase of MCI Inc.

For both deals combined, regulators required the divestiture of some fiber-optic lines in 19 metro areas.

Re-christening SBC as AT&T isn't a surprise, said Ted Chamberlin, a phone industry analyst at market research firm Gartner Inc. "AT&T is a global brand," he said, adding that SBC's name has a regional tinge.

American Telephone & Telegraph, a name coined in 1885, was long synonymous with the phone business. AT&T expanded from Alexander Graham Bell's 1877 startup to become the parent of the Bell system, the U.S. telephone monopoly that lasted until it was broken up in 1984.

AT&T is probably one of the world's 10 best-known brands, said George Rosenbaum, chairman of Leo J. Shapiro & Associates, a Chicago consumer research firm.

"It's in the league of Pepsi Cola, Coca-Cola, Microsoft and IBM. SBC is not," Rosenbaum said.

The SBC brand was born in 1995 when Southwestern Bell, a former Bell company, renamed itself. With dreams of expansion, Southwestern Bell didn't want to be associated with just one region.

SBC has since grown well beyond its original turf by acquiring two regional Bell companies, including the 1999 purchase of Ameritech of Chicago.

The SBC brand is now well known in the 13 states in which it operates, said Jeff Kagan, an Atlanta telecomunications analyst.

Still, by adopting the iconic AT&T brand, SBC is signaling that it intends to become an even bigger force in the communications business, Kagan said. That's important because the business itself is being reinvented, he said.

SBC and other phone companies are moving into Internet service and retooling their networks to offer television. Meanwhile, cable TV firms are trying to pry into the phone business.

Still, SBC will need to tinker with the AT&T brand, telecom and marketing observers say. "It has to reinvent the name and update it," Kagan said.

That's because as venerable as it is, the name comes with some negatives, too, several observers say. AT&T "is a big company that has a lot of baggage," said Gartner's Chamberlin.

New Jersey-based AT&T has been in a long period of decline. The company exited the household long-distance market in 2004, ceding it to the regional Bell companies and emerging competition from the Internet. AT&T opted to focus on its core strength, business clientele.

In addition, the company's one-time position as a monopoly connotes red tape and bureaucracy.

"There is an image of AT&T as a big, lumbering company that does things the old way," Chamberlin said.

SBC plans to pump up the AT&T image in what it calls "the largest multimedia advertising and marketing campaign in either company's history." When the merger closes, the new AT&T also will unveil a "fresh, new logo," SBC said.

In addition, SBC Park, formerly PacBell Park, is likely to receive its third name since the home stadium of baseball's San Francisco Giants opened five years ago.

The SBC-AT&T deal is to be completed by the end of the year. Three state regulatory bodies must still give their approvals. The Federal Communications Commission is expected to vote as early as today on the SBC-AT&T and Verizon-MCI deals.

The Justice Department approved the two mergers on the condition that the companies divest so-called "dark," or unused, fiber-optic networks that run to several hundred buildings serving mostly business customers in 19 metropolitan areas.

Verizon will divest lines to about 350 buildings in several states and the District of Columbia in the company's East Coast markets, including lines to about 50 buildings in Maryland, within 120 days after the merger closes. The lines could be used for telephone service and high-speed Internet.

SBC will lease fiber-optic lines serving 383 commercial buildings in the SBC region where it and AT&T were the only providers. The 10-year leases will be paid up front, and will give complete control to the leasing companies. SBC and AT&T are the only providers of fiber-optic lines at those buildings.

Without the agreement, the Justice Department said some business customers would have ended up paying higher prices.

MCI's shares rose 13 cents to close at $28.52 yesterday on the Nasdaq stock market; Verizon climbed 17 cents to $30.76 on the New York Stock Exchange; AT&T added 10 cents to $19.60; and SBC inched up 5 cents to $23.80.

Mike Hughlett writes for the Chicago Tribune. Sun reporter William Patalon III, the Associated Press and Bloomberg News contributed to this article.

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