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Ameritech and SBC Begin Divestiture Plans for Cellular Businesses

Strategic Insights

— 1 min read

Ameritech Corp. and SBC Communications Inc. are merging, creating a $62-billion telephone giant. As part of the merger, the two companies are informally canvassing potential buyers for their 16 cellular businesses in overlapping markets, including the highly lucrative Chicago and St. Louis operations. The companies are positioning themselves to comply with federal regulations banning a single carrier from owning more than one cellular business in a given market.

Key Takeaways:

  • The divestiture of 16 cellular businesses is a key part of the merger plans, with the companies targeting the second half of next year for closing the deal.
  • Ameritech and SBC officials are soliciting expressions of interest in the businesses, but have not yet engaged an investment banker to actively seek buyers.
  • Potential buyers include Philadelphia-based GTE Corp., Arkansas-based Alltel Corp., and Philadelphia-based Comcast Corp., as well as AT&T Corp.
  • Acquiring either Ameritech or SBC's cellular units could be complicated, as the buyer would have to divest their own wireless holdings in the overlapping markets to comply with federal regulations.
  • Ameritech and SBC officials have not revealed which of the two cellular businesses in Chicago will be put up for sale - Ameritech Cellular Services or SBC's Cellular One.
  • The companies have begun positioning themselves to comply with federal regulations, but divestiture probably won't occur for at least a year.
  • Planning for the sale of these overlapping cellular businesses is still in its earliest stages, with no specific timeline or details announced.

Statistics:

  • 16 cellular businesses are up for sale, with operations in 3 states: Illinois, Indiana, and Missouri.
  • The Chicago and St. Louis markets have a combined population of 11.7 million.
  • Ameritech and SBC have competing cellular phone systems in 11 markets, including Kankakee, Aurora, Joliet, and Springfield.
  • SBC has cellular operations in 7 markets, including Gary, Ind., and rural Callaway, Maries, Perry, Stoddard, and Montgomery counties in Missouri.
  • AT&T Corp. has expressed interest in acquiring either Ameritech or SBC's cellular units, but would have to divest their own wireless holdings in the overlapping markets to comply with federal regulations.

Sources:

  • Industry sources
  • SBC spokesman
  • One cellular executive whose company recently was approached by both Baby Bells
  • AT&T spokesman
  • Herschel Shosteck, Maryland-based wireless telecommunications consultant

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