From: FZC@CU.NIH.GOV
Newsgroups: comp.dcom.telecom
Subject: AT&T to Buy McCaw Cellular For $3.8 Billion
Date: 5 Nov 92 23:34:41 GMT
Reply-To: TDARCOS@MCIMAIL.COM
Organization: TELECOM Digest
X-Submissions-To: telecom@eecs.nwu.edu
X-Administrivia-To: telecom-request@eecs.nwu.edu
X-Telecom-Digest: Volume 12, Issue 823, Message 1 of 6

Two views of the same story: Nov 5, 1992

[Page 1, USA Today]

AT&T has $4 billion cellular phone deal on the line
By John Schneidawind, USA TODAY

AT&T and the USA's No. 1 cellular phone company are joining hands to
form a nationwide wireless phone network.

AT&T said Wednesday it wants to spend almost $4 billion to acquire a
33% stake in McCaw Communications.

The deal could hasten the day when we use pocket-sized cellular phones
anywhere in the world.

On the way to consumers:

 - Better cellular service.  Now, you usually have to change cellular
numbers in each city you visit.  In the future, you could take along
your phone -- and number.

"Think of the possibility of having one phone number and the phone
that travels with you," says Craig McCaw, chief executive if NcCaw,
which has 2.1 million customers in more than 100 cities.

 - Cheaper service.  Cellular rates have been falling, but still
average $69 monthly.

McCaw would use AT&T's money to pay down McCaw's $5 billion debt.  "We
have to drive our expenses down so we can afford to operate at prices
the average consumer can consider," he says.

Says Robert Morris, an analyst at Goldman Sachs: "AT&T would get back
into the local phone business with the technology of tomorrow."

For now, the McCaw family keeps voting control, but AT&T has an option
to gain control over seven years.

"We're dating now -- we're not getting married yet," says AT&T's CEO
Robert Allen.

The deal, first reported by USA TODAY's Dan Dorfman, is the largest
that has been announced this year.


[ Page B12, {The Washington Post} ]

AT&T Seeks Stake in McCaw Cellular
Deal May Spur National Mobile Phone System
By Cindy Skrzycki, Washington Post Staff Writer

   AT&T, the nation's largest long-distance company, yesterday
announced that it is negotiating a $3.8 billion strategic alliance
with McCaw Cellular Communications Inc., the nation's largest cellular
telephone company.

   The proposed alliance gives AT&T immediate access to one of the
fastest-growing markets in the telecommunications industry -- wireless
phone technology.  McCaw, considered an innovative leader in the
cellular industry with 2.1 million cellular subscribers, would be able
to tap into AT&T's formidable national marketing, distribution and
research capabilities to advance its goal of establishing a nationwide
cellular network.

   "Over the last 20 years I have entered into dozens of strategic
alliances," said Craig McCaw, chairman and chief executive of McCaw.
"None have ever made more sense to me."

   "McCaw, who currently controls the $1.3 billion company, called
McCaw and AT&T "natural allies" with a "common vision."

   He added that one possible benefit of the alliance could be cheaper
cellular service.

   The two companies said they envision bringing to market more
quickly new advances such as a single nationwide telephone number for
each wireless telephone user and a portable handset that works
everywhere and is programmable.

   Prior to yesterday's announcement, McCaw had been moving in this
direction with alliances with other companies, such as Oracle Corp.
and International Business Machines Corp.

   The proposed deal gives AT&T a 33 percent interest in McCaw and an
option to eventually acquire voting control of the company.  AT&T paid
$100 million for the option and would pay another $600 million if it
exercised it.

   The proposed deal would return to American hands the 22 percent
stake that British Telecommunications PLC has held in McCaw since
1989.  AT&T will pay the British firm $1.8 billion, or $49 a share.
Similarly, AT&T will pay McCaw $2 billion for new McCaw shares valued
at $42 each.

   British Telecom yesterday cited "the regulatory constraints of
foreign ownership" as one reason it was selling its stake for a
profit.  The average price paid by AT&T for its stock would be $45 a
share.

   AT&T, already a supplier of cellular equipment and handsets, enters
the cellular market at a time of great ferment over what the next
generation of wireless telephony will be.

   Currently, three companies, none of which are in the cellular
industry, have experimental licenses from the Federal Communications
Commission to develop and test new "personal communications" products.

   Before the breakup of the Bell System monopoly in 1984, AT&T was a
fledgling player in cellular service but got out of the business at
the time of the breakup.  Bell Laboratories developed the concept of
cellular phone service in 1947, and its scientists came up with the
first experimental system in 1962.

   AT&T also made cellular handsets but left that business in the
1980s only to reenter it last year.

   Robert Allen, chairman and chief executive of AT&T, said the
alliance announced yesterday supports growth of its long-distance
business and its desire to expand wireless services.  It also puts
AT&T in direct competition with some of the seven regional "Baby Bell"
companies that it used to own.

   AT&T made major strides in expanding wireless services with its
$7.48 billion acquisition of NCR Corp in the fall of 1991.

   The deal involving McCaw, if approved by regulatory agencies and
the boards of the companies, comes as another long-distance carrier,
Sprint, is attempting a merger with Centel Corp., another major
cellular company.

   "I think it's awesome," said Michael Elling, a telecommunications
analyst with the brokerage Oppenheimer & Co. in New York.

   In addition to giving McCaw nationwide marketing muscle, he noted,
AT&T has the technology to help crack down on the widespread problem
of tampering with cellular equipment to get free calls.

   Elling said McCaw will have more incentives to persuade customers
to stay loyal, rather than switch to other cellular carriers, by
offering discounts and other calling services of AT&T.

   Trading in the shares of both companies was halted before the
announcement, and didn't resume before the stock market closed
yesterday.  Before the halt, McCaw's shares were down $2.12 1/2 to
$26.75, wile AT&T was down 62 1/2 cents at $42.75.

   Analyst Alfred J. Humphries with Hanifen Imhoff Inc. said there was
some concern over the $5.3 billion debt that McCaw is carrying from
its purchase of LIN Broadcasting Corp., another cellular carrier.
Proceeds from the deal would be used to pay down that debt.

   AT&T's Allen, expressing confidence in McCaw, noted that the
proposed alliance does not pose "any risks we are particularly
concerned about."

   However, Herschel Shosteck, a telecommunications consultant in
Silver Spring, suggested that AT&T paid too much for the privelege of
entering the cellular market with McCaw, particularly since the
promise of the personal communications market is unclear.

                    --------

Staff writer Mark Potts contributed to this article.