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Waiting’s Over:
SNET Sold
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Business New Haven
1/12/1998
By: Michael C. Bingham
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$4.4 billion deal gives Southwestern telecom giant a toehold in Bell Atlantic country
A century-old tradition of locally owned telephone service in Connecticut came to an abrupt close January 5 when the New Haven-based Southern New England Telecommunications Corp. announced it would be acquired by the San Antonio, Tex.-based SBC Communications Inc.
The deal - a stock swap valued at $4.4 billion - will give SBC, one of seven regional telephone companies created by the breakup of the AT&T monopoly in 1984, a foothold in the Northeastern telecommunications market currently dominated by Bell Atlantic.
With more than 116,000 employees and reported 1996 revenues of $23.5 billion, SBC Communications operates under the Southwestern Bell, Pacific Bell, Nevada Bell and Cellular One brands
SNET becomes the second major telephone company to be acquired by SBC in the past 12 months. In April 1997 it bought Pacific Telesis, another of the so-called Baby Bells.
Upon completion of the sale, which is anticipated by the end of the year, SBC will serve more than 34.7 million access lines and have access to more than 92.6 million potential wireless customers nationwide.
The sale is subject to the approval of the Federal Communications Commission (FCC), the state's Department of Public Utility Control and SNET stockholders. Under terms of the transaction, holders of SNET common stock would receive 0.8784 of a share of SBC common stock for each share of SNET common stock in a tax-free exchange. Based on SBC's closing stock price on January 2 of $74.9375 per share, this represents a value of approximately $65.83 for each SNET share.
News of the transaction sent SNET stock soaring more than $10 to a high of $60 in trading January 5 on the New York Stock Exchange. However, Wall Street concerns that it may have offered too high a price for SNET drove SBC's own stock price down nearly four percent ($2.875) to $72.3125 on the day of the announcement.
Some analysts conjectured that SBC may have paid the 33 percent premium to head off a bid by a rival suitor, such as Bell Atlantic. However, in a prepared statement, Bell Atlantic said that “Investing in SNET is not a strategic imperative” for the company. Even so, shares of Bell Atlantic dipped 2 14/16 to $83.1875 on the announcement.
Tight-lipped SNET officials said the two companies had been in negotiations for two or three months, but declined to reveal which side initiated the talks. SNET further refused to reveal whether other suitors were considered.
The deal may face opposition from some quarters: Massachusetts U.S. Rep. Edward Markey, ranking Democrat on the House Commerce Committee's telecommunications subcommittee, urged federal regulators to block the deal. Markey accused SBC of reneging on promises it made to Congress during negotiations over the 1996 Telecommunications Act. Under that legislation, regional Bells such as SBC may not enter the $80 billion long-distance market until they take steps to open their local monopolies to competition.
SBC will continue to operate SNET under its existing brand name. Operations will continue to be based in New Haven, the company said.
An SNET spokesperson said no layoffs are anticipated in the immediate future. SNET employs about 9,700 workers, nearly all in Connecticut.
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