AT&T Inc. said on Sunday it would buy BellSouth Corp. for $67 billion to expand its reach into the southeastern United States and acquire the rest of Cingular Wireless it does not already own.
Together, AT&T and BellSouth would have a national long-distance telephone and data network, residential customers stretching from Florida to California and business customers comprising more than half of the Fortune 1000, analysts have said.
BellSouth shareholders will receive 1.325 shares of AT&T common stock for each common share of BellSouth. Based on AT&T's closing stock price on March 3, that equals $37.09 per BellSouth common share, a 17.9-percent premium.
The new AT&T, which was formed in November when SBC Communications Inc. completed its acquisition of AT&T Corp., also said it would repurchase at least $10 billion of its common shares over the next 22 months.
The companies have a combined market capitalization of $165 billion and annual revenue of about $64 billion. The next largest telephone company, Verizon Communications, which bought MCI Inc. last year, has a market capitalization of $99 billion and 2005 annual revenues of about $75 billion.
The deal would bring ownership of Cingular Wireless, the No. 1 U.S. wireless telephone company, under one roof, which Wall Street analysts have said would streamline management and allow one parent company to enjoy all of the financial benefits.
AT&T currently owns 60 percent of Cingular, while BellSouth owns the remaining 40 percent. Despite its heft, Cingular has been losing marketshare of the most lucrative, post-paid customers to its main rival, Verizon Wireless.
At the completion of the deal, which is expected to close within a year, all the landline and wireless businesses will exist under the sole brand name of AT&T, the companies said.
A purchase of BellSouth would recombine the former "Ma Bell" with four of the seven original Baby Bells regional telephone companies. AT&T was broken up in 1984, with the parent controlling the long-distance assets and its seven offspring controlling regional local telephone services.
As traditional landline phone businesses have been hurt by a shift to e-mail and wireless phones, telephone carriers have shifted their focus to faster growing businesses such as wireless and data services.
AT&T and other major telephone companies also have been upgrading their networks to offer subscription-television services to thwart competition from cable TV operators, which are offering phone services. AT&T in January began offering video in Texas and plans to expand service to 21 cities in its home territory this year.