MergerTalk: Integration Can Make or Break AT&T
PHILADELPHIA (Reuters)—With its $65 billion agreement to buy BellSouth Corp., AT&T Inc. faces one of the biggest challenges in its history: integrating two stodgy telephone companies with the nation’s largest wireless company and making good on $18 billion in promised cost savings.
Although the deal had been widely expected, the timing was a surprise to Wall Street, coming just three months after SBC Communications completed its purchase of AT&T Corp. to form the “new” AT&T Inc.
Together, AT&T and BellSouth would have a national long-distance telephone and data network, residential customers in 22 states and business customers comprising more than half of the Fortune 1000.
The deal also would bring Cingular Wireless, a joint venture of AT&T and BellSouth, under the control of one company and one brand. Cingular had acquired AT&T Wireless in 2004 to become the largest U.S. wireless company.
“The key risk is that there is simply too much to accomplish at the same time that competitive and technological pressures reach new levels,” said Morgan Stanley analyst Simon Flannery said.
AT&T expects to squeeze $18 billion in synergies out of the deal by eliminating 10,000 workers, integrating telephone networks and technology systems, reducing advertising expenses by having only one brand name, and gaining pricing leverage with vendors.
Some analysts fear that AT&T may be tackling too much, too fast.