Br.small Co.2 Regulatory News (BSC)

6 Mar 2006 07:00

Bellsouth Corp05 March 2006 Note: AT&T Inc. will hold an analyst conference call to discuss the merger thatwill be broadcast live via the Internet at 10 a.m. EST on Monday, March 6, 2006,at www.att.com/investor.relations or http://www.bellsouth.com/investor. For More Information: BellSouth AT&T AT&TJoe Chandler Michael Coe Walt Sharp404-312-1964 212-453-2198 210-351-3349 AT&T, BELLSOUTH TO MERGE Combination Will Speed Innovation, Competition and Convergence • Natural combination of two leading wireline providers and jointowners of Cingular speeds progress in integrated wireless/wireline services • Substantial financial benefits for stockholders of both companies;an expected net present value of $18 billion in synergies resulting from a morethan $2 billion annual run rate in synergies expected in 2008, growing to $3billion in 2010 • Expect merger to be accretive to AT&T adjusted earnings per share in2008, double-digit adjusted EPS growth in each of next three years (earningsadjusted for merger integration costs and amortization of intangibles) andsignificant growth in free cash flow after dividends in 2007 and 2008 • AT&T's board authorizes share repurchase of 400 million shares byend of 2008; buy back of at least $10 billion in shares over next 22 monthsplanned, with the majority in 2007 • Merger will benefit customers and promote competition SAN ANTONIO and ATLANTA (March 5, 2006)-AT&T Inc. (NYSE:T) and BellSouthCorporation (NYSE:BLS) announced today an agreement to merge the two companies,a combination that will create a more effective and efficient provider in thewireless, broadband, video, voice and data markets. The merger will streamline the ownership and operations of CingularWireless, which is jointly owned by AT&T and BellSouth. The new company will bemore innovative, nimble and efficient, providing benefits to customers bycombining the Cingular, BellSouth and AT&T networks into a single fullyintegrated wireless and wireline Internet Protocol network offering a full rangeof advanced solutions. As a result, the combined company will be better able to speed theconvergence of new and improved services for consumers and businesses, andembrace the industry's shift to Internet Protocol network-based technologies. "Logical Next Step That Creates Substantial Value" "This merger is a logical next step that creates substantial value for customersand stockholders of both AT&T and BellSouth," said AT&T Chairman and CEO EdwardE. Whitacre Jr. "It will benefit customers through new services and expandedservice capabilities. It will strengthen Cingular through unified ownership anda single brand. And we are confident that this is a merger we can execute,based on our track record with previous integrations and our experience workingclosely with BellSouth to create and build Cingular Wireless, and operateYellowpages.com. "This transaction combines two solid, very well-run companies," Whitacre added."BellSouth operates in an attractive region with a growing economy. It hasgreat employees and an outstanding network, with fiber optics deeply deployed inits service area. It has a strong record in terms of customer service and asound, conservative balance sheet. These strengths, added to those of AT&T, willimprove our ability to provide innovative services to more customers whilereturning substantial value to our owners and improving our growth profile." "Technology changes and convergence are shaping a new competitive dynamic andcreating tremendous opportunity," said Duane Ackerman, chairman and CEO ofBellSouth. "We're creating a company with much better capabilities to seizethese opportunities while maintaining its strong focus on customer service andcommunity involvement. "This was the right time for this merger," said Ackerman. "This combination isgood for our employees, our customers and our stockholders." AT&T has committed to continue BellSouth's historic levels of charitablecontributions and community activities, including the continued funding ofcharitable activities and economic development and education initiativesthroughout BellSouth's nine-state area. "Our focus is on providing great service and innovative, competitively pricedproducts for consumers and businesses throughout the Southeast, the nation andthe world," said Whitacre. "Together, we will lead the way into a new era ofconverged and bundled communications, video and entertainment services whilealso improving our ability to manage complex networks." Customer Benefits Consumers seeking a real alternative to cable monopolies should see faster andmore economical deployment of next-generation IP television networks and similarservices as a result of AT&T's groundbreaking entry into IPTV and theunparalleled research and development work at AT&T Labs, coupled withBellSouth's extensive deployment of fiber networks for DSL and other broadbandservices. Business customers in the southeastern United States and the rest of the countrystand to benefit from the expertise and innovation of AT&T Labs, as well as thecombination of AT&T's state-of-the-art national and international networks andadvanced services with BellSouth's local exchange and broadband distributionplatforms and expertise. The combined company will have greater financial, technical, research anddevelopment, network and marketing resources to better serve consumers andlarge-business customers, and will accelerate the introduction of new andimproved product and service sets for those customers. The merger would also give business and government customers,including military and national security agencies, a reliable U.S.-basedprovider of integrated, secure, high-quality and competitively priced servicesto meet their needs anywhere in the world. Since AT&T and BellSouth are not actual competitors in the local,long distance and video markets, and because BellSouth is not a significantcompetitor with AT&T in the enterprise market, the merger will not reducecompetition in any of those markets. Terms and Conditions Under terms of the agreement, approved by the boards of directors of bothcompanies, shareholders of BellSouth will receive 1.325 shares of AT&T commonstock for each common share of BellSouth. Based on AT&T's closing stock price onMarch 3, 2006, this exchange ratio equals $37.09 per BellSouth common share.This represents a 17.9 percent premium over BellSouth's closing stock price onMarch 3, 2006, and a total equity consideration currently valued atapproximately $67 billion. The merger, which is subject to approval by shareholders of both companies, aswell as regulatory authorities and to other customary closing conditions, isexpected to close within approximately 12 months. Making the Most of Wireless One of the most immediate benefits of the transaction will be to streamline andenhance management and operations at Cingular. "The Cingular partnership and the company itself are performing extremely well,particularly after the AT&T Wireless acquisition," said Whitacre. "But nopartnership between two independent companies, no matter how well run, can matchthe speed, effectiveness, responsiveness and efficiency of a solely ownedcompany." While the majority of Cingular's operations will remain unchanged, simplifyingthe ownership structure will lead to more efficient marketing and serviceprovisioning, which will come under a single AT&T brand, generating furtherfinancial synergies and customer benefits. The merger will also allow for closer integration of the company's wireless,wireline, and IP products and services over a single global IP network. This iscritical as the industry moves forward with convergence of the "three screens"that many consumers rely on most today - televisions, computers and wirelessdevices. It is an area in which AT&T is a leader through its strategicpartnerships with Yahoo!(R) and others. "We are excited about the potential for bringing a robust set of integratedproducts and services to our customers in a faster and more effective mannerunder one brand," said Ackerman. Financial Expectations In addition to the numerous customer benefits, AT&T and BellSouth expect theproposed transaction to yield substantial benefits for stockholders of bothcompanies. The merger combines three companies that currently operate separately andindependently: AT&T, BellSouth and Cingular Wireless. AT&T and BellSouthestimate that synergies from the combination will ramp quickly to reach anannual run rate exceeding $2 billion in the second year after closing, andestimate the net present value of expected synergies at nearly $18 billion. A substantial portion of synergies are expected to come from reduced costs inthe operations of unregulated and interstate services, and corporate staff, andthe synergies are over and above expected productivity improvements from thecompanies' ongoing initiatives. Approximately half of the total cost savings areexpected to come from network operations and IT, as facilities and operationsare consolidated and traffic is moved to a single IP network. Additional savingsare expected to come from combining staff functions and from reduced ongoingadvertising and branding expenses. Currently, the three companies support threedistinct brands with three separate advertising campaigns. Following the merger,they expect to move to a single brand: AT&T. AT&T expects the transaction to be adjusted earnings-per-share neutral in 2007and have a positive impact on its adjusted earnings per share thereafter(adjusted earnings per share exclude all merger integration costs and non-cashexpenses for amortization of intangibles). AT&T expects that the merger willreinforce the guidance it provided at its Jan. 31, 2006, analyst conference. • There is no change to AT&T's 2006 outlook. • AT&T continues to expect double-digit adjusted EPS growth in each ofthe next three years with significant growth in free cash flow after dividends.Free cash flow after dividends is expected to exceed $4 billion in 2007 andexceed $6 billion in 2008. • Total revenues, including Cingular, are expected to return to growthin 2007, a year earlier than previous guidance. • Capital expenditures, including Cingular, are expected to be in themid teens as a percentage of revenues in 2007 and 2008. • The transaction also is expected to improve AT&T's overall growthprofile - driven by wireless, which will represent about one-third of thecombined company's expected revenues in 2007, and by expanded opportunities inbusiness markets. • AT&T expects free cash flow after dividends from the combinedcompany to provide the flexibility to continue reducing debt levels over thenext five years while providing excellent cash returns to stockholders. AT&T and BellSouth expect that the combined company will have a strong balancesheet with solid credit metrics. Both companies have single A credit ratings. Expanded Share Repurchase AT&T's board of directors has approved an expanded share repurchaseauthorization of 400 million shares through 2008, replacing the existingprogram. Under this authorization, the company expects to buy back at least $10billion of its common shares over the next 22 months. It expects at least $2billion in repurchases during 2006, consistent with its previous guidance, andan additional $8 billion in repurchases in 2007. This repurchase authorizationis intended to approximate the share premium paid to BellSouth stockholders aspart of this merger transaction. The timing and nature of these repurchases willdepend on market conditions and applicable securities laws. New Company Leadership Mr. Whitacre will serve as chairman, CEO and a member of the board of directors of the combined company. Mr. Ackerman will serve as chairman and CEOof BellSouth operations for a transition period following the merger.Additionally, three members of BellSouth's board of directors will join the AT&Tboard. The corporate headquarters for the combined company will remain in San Antonio.Cingular's headquarters will remain in Atlanta, as will the combined company'sSoutheast regional telephone company headquarters. About AT&T AT&T Inc. is one of the world's largest telecommunications holding companies andis the largest in the United States. Operating globally under the AT&T brand, AT&T companies are recognized as the leading worldwide providers of IP-basedcommunications services to business and as leading U.S. providers of high-speedDSL Internet, local and long distance voice, and directory publishing andadvertising services. AT&T Inc. holds a 60 percent ownership interest inCingular Wireless, which is the No. 1 U.S. wireless services provider with morethan 54 million wireless customers. Additional information about AT&T Inc. andAT&T products and services is available at www.ATT.com. About BellSouth BellSouth Corporation is a Fortune 100 communications company headquartered inAtlanta, Georgia. BellSouth has joint control and 40 percent ownership ofCingular Wireless, the nation's largest wireless voice and data provider with54.1 million customers. Backed by award-winning customer service, BellSouthoffers the most comprehensive and innovative package of voice and data servicesavailable in the market. Through BellSouth Answers(R), residential and smallbusiness customers can bundle their local and long distance service with dial-upand high-speed DSL Internet access, satellite television and Cingular(R)Wireless service. For businesses, BellSouth provides secure, reliable local andlong distance voice and data networking solutions. BellSouth also offers printand online directory advertising through The Real Yellow Pages(R) andYELLOWPAGES.COM(TM)from BellSouth. BellSouth believes that diversity and fostering an inclusive environment arecritical in maintaining a competitive advantage in today's global marketplace.More information about BellSouth can be found at http://www.bellsouth.com/. And investor information can be found at http://www.bellsouth.com/investor. Cautionary Language Concerning Forward-Looking Statements We have included or incorporated by reference in this document financialestimates and other forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. These estimates and statements aresubject to risks and uncertainties, and actual results might differ materiallyfrom these estimates and statements. Such estimates and statements include, butare not limited to, statements about the benefits of the merger, includingfuture financial and operating results, the combined company's plans,objectives, expectations and intentions, and other statements that are nothistorical facts. Such statements are based upon the current beliefs andexpectations of the management of AT&T Inc. and BellSouth Corporation and aresubject to significant risks and uncertainties and outside of our control. The following factors, among others, could cause actual results to differ fromthose described in the forward-looking statements in this document: the abilityto obtain governmental approvals of the merger on the proposed terms andschedule; the failure of AT&T shareholders to approve the issuance of AT&Tcommon shares or the failure of BellSouth shareholders to approve the merger;the risk that the businesses of AT&T and BellSouth will not be integratedsuccessfully or as quickly as expected; the risk that the cost savings and anyother synergies from the merger, including any savings and other synergiesrelating to the resulting sole ownership of Cingular Wireless LLC may not befully realized or may take longer to realize than expected; disruption from themerger making it more difficult to maintain relationships with customers,employees or suppliers; and competition and its effect on pricing, spending,third-party relationships and revenues. Additional factors that may affectfuture results are contained in AT&T's, BellSouth's, and Cingular WirelessLLC's filings with the Securities and Exchange Commission ("SEC"), which areavailable at the SEC's Web site (http://www.sec.gov). Neither AT&T norBellSouth is under any obligation, and expressly disclaim any obligation, toupdate, alter or otherwise revise any forward-looking statement, whether writtenor oral, that may be made from time to time, whether as a result of newinformation, future events or otherwise. NOTE: In connection with the proposed merger, AT&T intends to file aregistration statement on Form S-4, including a joint proxy statement/prospectusof AT&T and BellSouth, and AT&T and BellSouth will file other materials with theSecurities and Exchange Commission (the "SEC"). Investors are urged to read theregistration statement, including the joint proxy statement (and all amendmentsand supplements to it) and other materials when they become available becausethey contain important information. Investors will be able to obtain free copiesof the registration statement and joint proxy statement, when they becomeavailable, as well as other filings containing information about AT&T andBellSouth, without charge, at the SEC's Web site (www.sec.gov). Copies of AT&T's filings may also be obtained without charge from AT&T at AT&T's Web site(www.att.com) or by directing a request to AT&T Inc. Stockholder Services, 175E. Houston, San Antonio, Texas 78258. Copies of BellSouth's filings may beobtained without charge from BellSouth at BellSouth's Web site(www.bellsouth.com) or by directing a request to BellSouth at InvestorRelations, 1155 Peachtree Street, N.E., Atlanta, Georgia 30309. AT&T, BellSouth and their respective directors and executive officers and othermembers of management and employees are potential participants in thesolicitation of proxies in respect of the proposed merger. Informationregarding AT&T's directors and executive officers is available in AT&T's 2005Annual Report on Form 10-K filed with the SEC on March 1, 2006 and AT&T'spreliminary proxy statement for its 2006 annual meeting of stockholders, filedwith the SEC on February 10, 2006, and information regarding BellSouth'sdirectors and executive officers is available in BellSouth's 2005 Annual Reporton Form 10-K filed with the SEC on February 28, 2006 and BellSouth's proxystatement for its 2006 annual meeting of shareholders, filed with the SEC onMarch 3, 2006. Additional information regarding the interests of such potentialparticipants will be included in the registration statement and joint proxystatement, and the other relevant documents filed with the SEC when they becomeavailable. (c) 2006 AT&T Knowledge Ventures. All rights reserved. Subsidiaries andaffiliates of AT&T Inc. provide products and services under the AT&T brand. This information is provided by RNS The company news service from the London Stock Exchange