Executives of SBC said, however, that Mondays announcement was unrelated to last weeks ground-breaking court decision that could serve to remove the barriers that prevent all-out competition for long-distance customers across the country.
SBCs planned acquisition of SNET echoed its purchase of the much larger Pacific Telesis, the Baby Bell serving much of California, last year. Both represent horizontal acquisitions of other companies that are primarily local carriers, extending SBCs reach beyond its original narrow territory. Purchasing SNET would strengthen SBCs position in the north east, where it already operates a cellular service, and position it to carry telecoms traffic to Europe, Wall Street analysts said.
Unlike the five regional Baby Bells that dominate the local markets, though, SNET, an independent local company that dates back to 1882, has been free to enter the long-distance business for some time. Daniel Miglia, chairman and chief executive, said the company had won a 40 per cent share of long-distance calls in Connecticut since it began selling the service three years ago.
Although Baby Bells such as SBC are prevented from offering long-distance services in their local regions, they do not face any restrictions in other parts of the country. AT&T, the biggest long-distance carrier, indicated to Wall Street analysts on Monday it would not take legal action to block the deal. However, it said it expected the Federal Communications Commission to use the proposed acquisition to squeeze concessions from SBC to further open its local markets.
The deal is dependent on approval from the FCC, the Justice Department and the local Connecticut public utilities commission. AT&T and SBC themselves discussed a merger earlier this year, before Reed Hundt, the former FCC chairman, came out publicly against such a combination of big local and long-distance carriers.
The companys after-tax earnings slipped slightly to $142 million on sales of $1.5 billion in the nine months to the end of September, reflecting the costs of expanding into new markets.
SBC said it had agreed to issue 0.8784 of a share for each share in SNET. After a $2 7 /16 fall in its stock yesterday morning, to $72 3 /4, its offer was worth $63.90. SNETs stock jumped $10 3 /16, or 20 per cent, to $59 3 /4. Copyright Financial Times Limited 1998.