SBC-AT&T Close Merger after Getting Final Okay From Cal.
SBC and AT&T cleared the last regulatory obstacle to their merger Fri. as the Cal. PUC voted 4-1 to approve the transaction. Cal. was the last to act of the 36 states whose merger approval was required by SBC-AT&T. With all necessary federal and state approvals in hand, the companies immediately closed on their merger. At the same meeting, the PUC also voted 3-2 to approve the Verizon-MCI merger.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
“Today marks the birth of AT&T Inc.,” the company said, referring to its plan to rename itself. SBC said it will begin trading under AT&T’s “T” symbol on the N.Y. Stock Exchange on Dec. 1. A new logo will be revealed today (Nov. 21), which will be the company’s first full day of operation as the “new AT&T.” It will offer an updated financial outlook at an investor conference in N.Y.C. Jan. 31.
SBC Chmn. Edward Whitacre said the combined companies offers a broad range of integrated communications and entertainment. “This combination is more powerful because of our shared heritage of innovation, service quality, reliability and integrity,” he said. SBC’s local phone companies were part of AT&T before the AT&T breakup in 1984. The new AT&T, the largest telecom company in the U.S., will “hit the ground running,” SBC said in a news release: “Through legally permissible ways, a team of managers began integration planning soon after the original announcement to help jump-start the transition after the merger close.”
The PUC subjected SBC-AT&T to 4 conditions: (1) Begin offering stand-alone, or “naked,” DSL to retail customers by March 2006, similar to an FCC merger condition. (2) Increase to 27% from 23% the percentage of goods and services purchased for Cal. operations from minority-owned businesses. (3) Contribute an additional $57 million over 5 years to state and local programs aimed at reducing the “digital divide” suffered by disadvantaged populations, and contribute $45 million over 5 years to a new Cal. Emerging Technology Fund aimed at bringing broadband service to all populations in the state. (4) Freeze for one year rates for DS-1 and DS-3 private network services for current AT&T customers, similar to an FCC merger condition.
Dissenting Comr. Geoffrey Brown said the merger vote should have been delayed so the PUC could evaluate the effects on Cal. and the companies of the various federal merger conditions. He also objected to the PUC waiving a state law requirement that utility mergers return half their initial savings to ratepayers, and its decision against imposing a variety of rate, service and monitoring obligations that had been recommended by an administrative law judge. Brown said the decision denied Cal. consumers over $300 million in benefits that they should be entitled to.
But PUC Pres. Michael Peevey and Comr. Susan Kennedy defended the decision. “This merger isn’t recreating Ma Bell,” said Peevey. “The AT&T of today isn’t the AT&T of 1984, and the [telecom] market today is very different from 21 years ago.” He said neither carrier is regulated by traditional earnings-based methods because neither is a monopoly. He said the forces of competition in today’s market will ensure consumers benefit, so there’s no need for quantifying and rebating estimated merger savings. Kennedy said the PUC merger decision is consistent with a “seismic shift” to competition in the telecom marketplace. She said the conditions the PUC imposed will ensure that customers are able to exercise choice, without imposing unnecessary constraints on the carriers.
PUC Also Okays Verizon-MCI
Immediately following the SBC-AT&T vote, the PUC voted 3-2 to approve the Verizon-MCI merger, subject to 2 conditions: (1) Begin offering retail stand-along DSL by Feb. 2006, similar to an FCC merger condition. (2) Contribute an additional $20 million over 5 years to state and local digital divide projects, to the same sorts of groups as SBC-AT&T, and contribute $15 million over 5 years to the same Cal. Emerging Technology Fund cited in the SBC-AT&T merger. Unlike the case with SBC-AT&T, several other states including N.Y. still have to act on the Verizon-MCI merger.
Peevey and Kennedy said they favored Verizon-MCI for the same reasons as SBC-AT&T, while Brown opposed it for the same reasons as SBC-AT&T, saying the decision will deny ratepayers over $100 million in benefits. He said this decision, coupled with the SBC-AT&T order, “effectively repeals Section 854. With these precedents, we'll never have authority to fully scrutinize any future merger.” PUC Comr. Dian Grueneich asked the agency’s gen. counsel if the handling of the telecom mergers set a binding precedent for future merger cases, but was told it wouldn’t, that the PUC in future would be free to apply whatever laws and rules it felt were appropriate.
Grueneich, who'd voted in favor of SBC-AT&T, joined Brown in voting against the Verizon-MCI deal. She said that while she wasn’t completely satisfied with the handful of conditions attached to the SBC-AT&T order, she went along with the final result because it was produced out of a complete examination of all aspects of the case, in a process that afforded every party abundant opportunity to be heard and to cross-examine their opponents. She said this wasn’t the case with Verizon- MCI, which was handled through comment and briefing cycles without evidentiary hearings: “The lack of evidentiary hearings in a case where there were material disputes over the facts denied some parties their due process rights.” She said the lack of hearings weakened the PUC’s lines of defense if parties ask for reconsideration or file appeals.”