Windfall for BT as AT&T buys McCaw
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Your support makes all the difference.AT&T, which had agreed to buy a third of McCaw Cellular last year, has decided instead to absorb completely America's largest mobile telephone company.
AT&T will pay the equivalent of dollars 12.6bn in shares to McCaw's current owners, including dollars 2.2bn to British Telecommunications, which for a short time will become the largest shareholder in its international arch-rival. A spokesman for BT, which bought 22 per cent of McCaw in 1989, said the company did not see itself as a long-term shareholder in AT&T, but 'we are not going to commit ourselves to the sale of it within any specific timeframe'.
The merger represents a windfall for BT, which has carried the investment on its books at pounds 900m. Under AT&T's original proposal, BT would have received about dollars 49 a share, but now stands to get the equivalent of about dollars 62 - roughly doubling the gain it will recognise.
The gain will be a consolation for the failure of BT's original plans for McCaw, based on hopes that US regulations would allow it to play a much stronger role in the future of cellular communications in the US. BT opted instead last month to buy a controlling stake in AT&T's main rival in the long-distance market, MCI.
BT shares shed 4p to 429p. Iain Vallance, chairman, said this solution was 'good for McCaw's shareholders and should provide better value for BT shareholders than the previous arrangement'.
For AT&T, the merger offers a commanding presence in the fastest-growing segment of the US telecommunications industry. In the course of negotiating the details of its original deal, it became apparent that a minority stake would not allow it to integrate properly McCaw's wireless service into its network.
'Telecommunications is growing and converging with other industries so fast that it was almost impossible in our discussions to define and divide future opportunities between the two companies,' Robert Allen, chief executive of AT&T, said.
The merger, the second billion-dollar deal in as many years for AT&T, which bought the NCR computer group in 1991, represents a dilution of about 10 per cent in per-share value. AT&T will also assume the dollars 4.9bn debt McCaw has acquired in patching together its national cellular network.
But the company said McCaw's strong income growth - in the range of 40 to 50 per cent annually - would reduce the dilution almost immediately, and allow AT&T to achieve its goal of 10 per cent annual earnings growth much faster.
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