CLARIFICATION--AN ARTICLE IN SOME EDITIONS WEDNESDAY ON THE MERGER PLANS OF AMERITECH CORP. AND SBC COMMUNICATIONS INC., ATTRIBUTED TO NEWS SERVICES AND STAFF REPORTS, SHOULD HAVE NOTED THAT BLOOMBERG NEWS PROVIDED MOST OF THE MATERIAL. (PUBLISHED 07/02/99)
SBC Communications Inc. and Ameritech Corp. agreed yesterday to enter 30 local telephone markets in the next 2 1/2 years in return for regulatory approval of SBC's $78 billion purchase of Ameritech, which would create the largest U.S. local phone company.
The proposal is one of 26 conditions that the companies and U.S. Federal Communications Commission staff agreed should be met before the commission approves the merger. The plan is designed to increase local phone competition and access to high-speed Internet services for consumers.
SBC, the nation's second-largest local phone company, expects to complete the purchase of its smaller rival in August, said SBC General Counsel Jim Ellis. SBC-Ameritech, with about a third of U.S. local phone lines and $46 billion in annual revenue, would be subject to fines of more than $2 billion if it doesn't meet conditions imposed by the commission.
"The merger is now in the home stretch," said Ellis. Indiana and Illinois regulators are expected to rule on the merger in July, he said.
Seven regional Bell companies were born from the breakup of the Bell Telephone System in 1984. Recent mergers between the sibling companies have cut that to five; an SBC-Ameritech union would drop it to four.
These mergers and other jumbo buyouts in the telecommunications industry have brought pressure on the FCC to determine how big is too big. With yesterday's agreement, the agency has tentatively decided to let another merger go through, but with conditions attached that it contends will mitigate potential negative effects.
SBC and Ameritech, which had already said they intended to enter 30 new markets, are hurrying to provide competition that has been slow to materialize since the government deregulated the industry in 1996.
The conditions will be open to public comment, and FCC staff likely will make a final recommendation to the five-person FCC no earlier than the beginning of August. The FCC will then vote on whether to accept the staff's recommendation.
"The staff team has indicated they expect to recommend to the commission that the merger should be approved with the proposed conditions," FCC Chairman William Kennard said in a statement.
Shares of SBC and Ameritech rose on the New York Stock Exchange. SBC closed up 68 3/4 cents to $54.50, while Ameritech shares rose $2.50 to $70.
SBC and Ameritech also agreed to offer companies that want to resell their residential phone service discounts of 32 percent. Rivals that want to lease the so-called "last mile" of their networks -- the line going into customers' homes -- would get an average discount of 25 percent. Both measures are designed to help new competitors get a foothold in the local market without first having to build a local phone network from scratch, a costly and time-consuming process.
SBC also agreed to set up a new unit to provide high-speed data services to consumers. The company said 10 percent of the lines it upgrades for the services would be in low-income rural areas and 10 percent would be in low-income urban areas.
Kennard proposed a similar plan last year that would have required the regional Bell phone companies to offer high-speed services through a separate affiliate. That proposal has been on hold for several months while the agency reviews the impact of a Supreme Court ruling that strengthened the FCC's authority over local phone competition.