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AT&T: Buying Back its Monopoly

AT&T is the U.S.’s dominant phone company. Despite the 1983 breakup of AT&T’s monopoly by the Justice department into seven local phone monopolies, since then the company has re-acquired four of those local firms. Two of the local monopolies are now owned by Verizon, and one by Qwest, leaving 3 companies in control of almost the entire USA land line and cell phone market. (Other options for phone service are from the cable monopoly in your area, usually either Comcast or Time-Warner, which together have over half of all USA cable subscribers.http://ncta.com/contentview.aspx?contentid=73)

After the passage of the 1996 U.S. Telecommunications Act by congress, AT&T was freed to move into most other communications businesses. In the hopes of establishing a “synergy” between using phone and cable lines together to reach the maximum number of American homes and sell phone service, cellular, internet and pay TV as one package, AT&T made an ill-fated foray into the cable TV business, buying TCI, the nation’s largest cable system owner in 1998. In 1999 AT&T bought MediaOne, another large cable system owner. AT&T also bought a 2.5% stake in DirecTV.

Because this “synergy” did not excite the buying public, and the massive run-up in values of entertainment properties after the 1996 Telecom act meant that AT&T had rung up enormous debt in buying cable systems that were not worth those prices, AT&T’s stock took a huge dive. Several other major media firms that had expanded rapidly through debt-financed purchases in the 1990’s also soon wrote off billions of dollars in value. These firms included AOL-Time Warner, Vivendi Universal, Clear Channel radio, Qwest and MCI Worldcom. In 2001, AT&T sold its cable systems to Comcast, creating the USA’s largest system owner with almost 40% of all subscribers. AT&T also spun off its cell phone division, which was bought in 2004 by a partnership owned by SBC and BellSouth. This left AT&T as only a long distance firm again.

Ironically, the weakened AT&T sold itself to SBC in 2005, and SBC later that year bought BellSouth, re-creating the massive AT&T of before.

--Rex Frankel

SUMMARY OF ACQUISITIONS:

-1983 AT&T is split up; parent company will be AT&T long distance and Bell Labs phone equipment firm. Newly spun-off local phone service companies are Ameritech, Bell Atlantic, Pacific Bell, U.S. West, BellSouth, Southwestern Bell and Nynex. For the next 13 years, AT&T was restricted to only providing long distance phone service, while the local companies were restricted to selling local service.

-7/1990 AT&T buys Western Union’s email and telex business for $180 million

-1991 AT&T buys NCR for $7.5 billion

-8/1993 AT&T merges with McCaw Communications (#1 in US cell business) in deal valued at $12.6 billion

-9/1995 AT&T spins off its Bell Labs phone equipment business as Lucent Technologies (now known as Alcatel-Lucent) and also spins off NCR computer and cash register biz.

-4/1996 Southwestern Bell buys Pacific Bell for $15.6 billion

-1/1998 SBC buys independent Southern New England Telecom for $4.4 billion

-6/1998 AT&T buys TCI for $43.5 billion in stock. In deal, TCI’s former owner John Malone will retain control of TCI’s Liberty Media division and its interests in over 90 cable channels as a tracking stock of AT&T. AT&T will get TCI’s 111 million subscribers, and TCI has partnerships with other cable system owners that bring its reach up to half of US subscribers. AT&T will also get control of TCI’s @home internet service.

1/1999 SBC merges with Ameritech for $85 billion. Will sell off its Chicago cell system. Combined SBC/Ameritech/PacBell will control 1.3^rd of USA local phone lines. FCC staff calls merger anti-competitive. FCC eventually OKs the deal in 10/1999 after adding 30 conditions The conditions require SBC to sell discount access to other DSL ISPs and they must open their local phone service to competition.

-4/1999 AT&T bids $58 billion for MediaOne cable systems outbidding Comcast.They become part of AT&T Broadband. AT&T agrees to sell off 2 million subscribers of MediaOne to Comcast. In the deal, AT&T gets 25% stake in Time Warner’s cable systems. Time Warner protests the deal.

-10/2000 facing a loss of half its stock value in past year, AT&T splits into 3 companies: cable, wireless, and long distance phone and business services. The costs of upgrading TCI cable to broadband were underestimated at $2 rather than $10 billion. AT&T also controls Liberty but doesn’t own it as it is owned by shareholders of a separate tracking stock.

-11/2000 AT&T board votes to spin off Liberty Media and its stakes in Encore-Starz, USA, BET and Discovery, and could also sell its stake in Rainbow Media (controlled by Cablevision). 8/2001 is set as spin-off date, and Liberty holdings will also include stakes in Time Warner cable and News Corp.

1/2001 AT&T plans to sell its stake in E Channel, Food Network, Outdoor Life and Speedvision, Digital Cable Radio, Fox Sports New England, In Demand, National Cable Communications and the Sunshine Network which were acquired as part of MediaOne deal

-7/2001 AT&T Wireless is spun off to shareholders. AT&T will keep 7.4% stake, other holders include NTT DoCoMo of Japan with 17.4% and AXA financial firm with 6.7%

In 12/2001 AT&T sells cable broadband systems to Comcast for $52 billion in stock; giving existing AT&T shareholders 66% stake in Comcast. Comcast also gets 25% stake in Time Warner Entertainment, which owns HBO, Warner Brothers studio and TW’s cable systems, plus gets $20 billion or ½ of AT&T’s debt.

-2/2004 Cingular wireless, owned 60% by SBC and 40% by Bellsouth, bids $41 billion for AT&T Wireless. With purchase, Cingular will have 30% of US cell users compared to 24% by Verizon. FCC eventually requires sell-off of assets in 22 markets

-1/2005 SBC buys AT&T long distance for $15 billion. AT&T had been weakened by rise of cell phone use, appeals court ruling in 2004. SBC changes its name to AT&T. FCC and California's PUC require SBC to offer stand-alone DSL to customers

-3/2005 AT&T agrees to pay $67 billion in cash for BellSouth, and assume $22 billion in debt, giving it ownership of 4 of the original 7 Baby-Bells that were ordered spun-off in 1983 to settle monopoly issues.