Ameritech's $60-Billion Merger in Jeopardy as Illinois Regulators Press for Consumer Safeguards

Strategic Insights -

Ameritech's ambitious $60-billion merger with Texas-based SBC Communications Inc. is facing challenges in Illinois, where regulators are pushing for consumer safeguards in exchange for approving the deal. The proposed merger would create a $44-billion-revenues behemoth controlling about one-third of the nation's local telephone lines. Ameritech hopes to negotiate conditions under which the deal could be approved by the Illinois Commerce Commission (ICC), mirroring a process that led to a proposed settlement in Ohio last month.

Key Takeaways:

  • Ameritech is in talks with leading consumer advocates in Chicago to win their support for the merger, which would create a $44-billion-revenues behemoth.
  • The Illinois Commerce Commission (ICC) has laid out a tough case against the merger, citing potential harm to Illinois consumers, and is pushing for consumer safeguards such as rate reductions and service-quality guarantees.
  • Ameritech faces a more difficult task in Illinois than in Ohio, where the law poses higher hurdles for a negotiated settlement, and the ICC has established a tough case against the merger.
  • Consumer advocates, including Chicago-based watchdog group Citizens Utility Board (CUB) and Illinois Attorney General Jim Ryan, are seeking rate reductions, service-quality guarantees, and cost savings and benefits from the merger to be shared with ratepayers.
  • Former ICC Chairman Terrence Barnich suggests that the merger might not proceed if the conditions imposed by the ICC are too onerous.
  • Ameritech CEO Richard Notebaert is assuring investors that the deal is on track to close in midsummer, but merger opponents claim the talks indicate that Ameritech is worried.
  • The ICC hearings have reached a critical point, with a hearing examiner expected to issue a proposed order within several weeks, which will form the basis for a decision by the ICC's five commissioners by June 21.

Statistics:

  • $44 billion: Revenues of the proposed Ameritech-SBC merger behemoth
  • $60 billion: Value of the proposed merger
  • $393 million: Total amount of cost savings and benefits Illinois Attorney General Jim Ryan and Cook County State's Attorney Richard Devine are calling for to be returned to consumers over 10 years
  • 10 years: Period for which Illinois Attorney General Jim Ryan and Cook County State's Attorney Richard Devine are calling for cost savings and benefits to be returned to consumers
  • June 21: Deadline for the ICC's five commissioners to vote on the proposed merger
  • $90 million: Maximum penalties Ameritech could face if it fails to meet service-quality benchmarks

Sources:

  • "Ameritech, consumer advocates seek compromise on merger" by Bloomberg (Date not specified)
  • "Ameritech SBC Merger in Jeopardy as Illinois Regulators Press for Consumer Safeguards" by Chicago Tribune (Date not specified)
  • Interview with Terrence Barnich, former ICC chairman and president of New Paradigm Resources Group Inc. (Date not specified)
  • Interview with Martin Cohen, Executive Director of Citizens Utility Board (CUB) (Date not specified)
  • Interview with Gary Maher, president of the Cable Television and Communications Assn. of Illinois (Date not specified)
  • Interview with Philip J. O'Connor, former ICC chairman and head of the Midwest office in Chicago of New Energy Ventures (Date not specified)