Cingular agrees to buy AT&T Wireless; would create nation's largest cellular carrier

<br>ATLANTA (AP) _ Cingular Wireless won the bidding war to acquire AT&T Wireless Services for nearly $41 billion in cash, a deal that would create the nation's largest cell phone company. <br><br>The

Tuesday, February 17th 2004, 12:00 am

By: News On 6

ATLANTA (AP) _ Cingular Wireless won the bidding war to acquire AT&T Wireless Services for nearly $41 billion in cash, a deal that would create the nation's largest cell phone company.

The merger between the second and third largest U.S. wireless companies was announced Tuesday as Britain's Vodafone Group PLC withdrew from the contest after four days of rising bids.

``This combination is expected to create customer benefits and growth prospects neither company could have achieved on its own and will mean better coverage, improved reliability, enhanced call quality and a wide array of new and innovative services,'' said Stan Sigman, president and chief executive of Atlanta-based Cingular.

Cingular, a joint venture between SBC Communications Inc. and BellSouth Corp., said its winning bid was for $15 per share, an amount that would value AT&T Wireless at $40.7 billion. Cingular will also assume $6 billion of debt owed by AT&T Wireless.

The agreement, subject to the approval of AT&T Wireless shareholders and regulatory authorities, may be the largest all-cash buyout in U.S. history, said David Caouette, spokesman for AT&T Wireless.

The merger, paying AT&T Wireless shareholders a 27 percent premium over the company's closing stock price of $11.82 on Friday, would trim the number of national players in the U.S. cellular market from six to five.

However, Guzman and Co. analyst Patrick Comack said he didn't think the deal would lead to higher wireless phone prices for consumers. ``You still have some very aggressive competitors out there. Customers still have five choices,'' he said.

Combined, Cingular and AT&T Wireless have 46 million subscribers, enough to leapfrog Verizon Wireless' market leading customer base of 37.5 million.

The combined company will carry the Cingular name, and billing and other operational functions will be merged, but there will be no immediate impact on customers, said Ralph de la Vega, Cingular's chief operating officer.

``When these companies combine, one of the biggest benefits for customers is we'll have broader geographic coverage. This combination reduces roaming significantly,'' de la Vega said.

AT&T Wireless chief executive John Zeglis told reporters in a conference call Tuesday that he will not remain with the combined company once a deal is approved. Sigman will be chief of the company, Zeglis said.

``I'll hang around anytime Stan wants me to and then I'm onto the next thing,'' Zeglis said.

In a telephone interview Tuesday with The Associated Press, de la Vega said federal regulators may ask the combined company to divest itself of some assets where there is overlap.

``We think that there should not be any divestitures required,'' de la Vega said. ``The greatest competition is perhaps right here in the U.S. so the consolidation of two of the players should not cause any problems for competitors.''

He indicated there could be some jobs cuts or management changes, but would not elaborate. The combined company would have about 70,000 employees. AT&T Wireless had already planned to cut 1,900 jobs from a work force of 31,000 by the end of 2005.

In early trading on the New York Stock Exchange, AT&T Wireless shares climbed $1.99, or 16.8 percent, to $13.81. SBC Communications owns 60 percent of Cingular, while BellSouth owns 40 percent. Shares of SBC fell 35 cents to $24.70, while shares of BellSouth fell 90 cents to $28.65.

The deal brought to an end a heated bidding war that saw both Cingular and Vodafone boosting their offers following a Friday deadline to submit bid set by AT&T Wireless.

Cingular, which had 23.4 million customers late last year, opened its bidding at $13 a share, or $35 billion, two sources told The Associated Press on condition of anonymity. It then raised its offer to $14 a share early Monday. Vodafone matched Cingular's offers in each stage of the process, a source said.

AT&T Wireless' share price has risen steadily in recent weeks on news that it was putting itself on the auction block.

The carrier, based in Redmond, Wash., has more than 22 million subscribers, including a sizable base of corporate clients who tend to use more services and spend more money.

However, the company has struggled in recent months.

Late last year, it couldn't add new subscribers because of a glitch in a new software system designed to improve customer service.

AT&T Wireless also has acknowledged that it lost more customers than it gained under new federal rules that took effect in late November allowing cell phone users to change carriers without losing their phone numbers. The company has not released specific figures.