AT&T, McCaw Cellular negotiating strategic alliance for wireless

NEW YORK, -- November 4, 1992 -- AT&T and McCaw Cellular Communications, Inc., today announced they are negotiating to form a strategic alliance that would involve broad marketing and technological cooperation in wireless communications.

AT&T also would make a significant minority investment in McCaw and purchase an option that, if exercised, would lead to acquiring voting control.

Wireless communications is the fastest-growing segment of the telecommunications industry, expanding at a rate of 30 to 40 percent per year. It includes cellular telephones, paging and mobile data services.

The alliance would help speed the development of the first seamless wireless communications network to operate nationwide. McCaw Cellular is the foremost provider of wireless communications services in the U.S., and AT&T is the premier long-distance telecommunications company and a leader in new communications and network computing technologies.

The two companies would combine their strengths to offer personal communications services that reach people, not places -- with information when and where customers want it, and under their complete control.

In the agreement being negotiated, AT&T would grant McCaw Cellular a long-term license to use the AT&T brand name in marketing wireless services in North America. McCaw also would have access to AT&T's marketing, sales, customer service and distribution channels, as well as to the research and development capabilities of AT&T Bell Laboratories.

As part of the alliance, AT&T would purchase 47 million newly issued shares of McCaw's common stock at $42 per share. This $2 billion investment would give AT&T 19 percent ownership of McCaw Cellular, which would use the proceeds to pay down debt.

Also as part of the proposal, British Telecom, which currently owns 35.8 million shares of McCaw's Class A and Class B stock, would sell its interest to AT&T for $49 per share, plus interest from December 1992. The sale is subject to approval by BT's Board of Directors. BT currently is represented on McCaw Cellular's Board of Directors and has other shareowner rights.

AT&T's purchase of BT's shares would bring the average price per share paid by AT&T for new McCaw and existing BT shares to $45, giving AT&T about 33 percent ownership of McCaw Cellular.

AT&T would receive the right to designate three members of McCaw's Board of Directors, with McCaw's management team staying in place and remaining independent.

The proposed transaction also would enable AT&T to purchase an option from the controlling shareholders of McCaw Cellular to acquire voting control. AT&T would pay $100 million for the option, and an additional $600 million, plus interest, if the option is exercised.

This option, which would give AT&T a majority of seats on the board, would be exercisable between one and seven years, unless extended, after the agreement is consummated. McCaw Cellular is currently controlled by Craig O. McCaw, chairman and chief executive officer, under an agreement involving certain McCaw Cellular Class B share owners.

The transaction would not involve the purchase of shares from any McCaw public shareowners other than BT.

Separately, AT&T has agreed to purchase at McCaw's option, exercisable in February 1993, approximately 14.5 million newly issued shares of McCaw's Class A common stock at $27.625 per share, for a total price of $400 million. It is unlikely that McCaw Cellular would exercise that right if current negotiations result in a definitive agreement for an investment by AT&T.

Even if exercised, however, the price of additional new shares -- up to the 47 million AT&T is proposing to purchase -- would be adjusted so that the average price for the total purchase would remain $42 a share and AT&T's total direct investment would be $2 billion.

Companies share common vision

"We are delighted to welcome AT&T as our partner because of its tremendous strengths in innovation and network operations, and because its brand is the most widely valued in the telecommunications industry," said McCaw Cellular's CEO Craig McCaw. "McCaw and AT&T are natural allies. We share a common vision of personal communications services that reach people, not places, and our combined strengths will enable us to make our vision a reality more quickly.

AT&T Chairman and Chief Executive Officer Robert E. Allen said, "I am excited about the prospect of this alliance. It would stimulate more growth in our long distance business and propel us into the fastest growing segment of our industry.

"We respect the value of an entrepreneurial company like McCaw and its importance in pioneering new ideas and bringing them to fruition. We intend to take full advantage of that entrepreneurial spirit as we work with them to speed the day when people can communicate anytime from anywhere.

"We are committed," Allen continued, "to working with the whole industry to accelerate growth, add new services, and serve customers even better."

McCaw added, "Our potential alliance would provide McCaw Cellular with added resources to take advantage of the wealth of emerging business opportunities in wireless communications, enabling us to accomplish more for our employees, shareholders and customers. It would bring U.S. businesses and an increasingly broad base of consumers a whole new level of products and services, increasing productivity across a range of industries and helping America compete in the global marketplace."

Barry Romeril, British Telecom's group finance director, said, "When we bought into McCaw Cellular, we believed it to be a company with good prospects in an expanding market. That continues to be the case. However, we recognize that McCaw Cellular sees AT&T as a natural ally. Their two businesses are complementary and AT&T will not be affected, as BT has been, by the regulatory constraints of foreign ownership. In these circumstances, this is an excellent opportunity for BT to realize shareholder value from its investment."

As part of the proposed agreement, AT&T would be entitled to receive payments based upon McCaw's stock price performance. Payments would equal $15 million for each dollar the average stock price exceeds $80, $90 and $100 for the 30-day periods expiring Oct. 20, 1999, 2000 and 2001, payable in cash or stock at McCaw's option.

The potential transaction is still in negotiation, and there are no assurances that the parties will reach final agreement. McCaw Cellular's Board of Directors today appointed a special committee of independent board members to consider the transaction and make recommendations to the McCaw board.

Any agreement is subject to negotiation of final terms, approval by the McCaw's Board of Directors and by AT&T's Board of Directors, as well as by appropriate government agencies.

McCaw Cellular is the largest cellular service provider in the U.S. and is developing and marketing a broad range of wireless communications services, including a cellular network that spans the continent and is capable of transmitting voice and data communications.

McCaw Cellular owns a 52 percent interest in LIN BROADCASTING Co., which is engaged in cellular telephone operations, television broadcasting and specialty publishing.

It also has a 32 percent stake in American Mobile Satellite Corporation, which is developing a satellite-based communications network to provide personal communications service to remote areas of North American now out of reach of terrestrial communications systems, and a 51 percent stake in Claircom, Inc., a joint venture with Hughes Network System, which is licensed to provide telephone service to commercial and private aircraft.

McCaw Cellular is the nation's fifth largest paging service provider.

AT&T is a global communications and computer company, with total 1991 revenues of $63.1 billion. It operates the world's biggest and most advanced long distance network. The company provides communications services and products, as well as network equipment and computer systems, to businesses, consumers, telecommunications service providers and government agencies.

AT&T is also the leading provider of electronic switches and other equipment basic to the cellular industry and offers cellular phones and services through its nationwide Phone Centers.

Press call at 4:45 p.m.

Executives of AT&T and McCaw Cellular will discuss the proposed agreement and respond to reporters' questions in a conference call at 4:45 p.m. today. Reporters in the United States may access the call by dialing either 1-800-572-5476 or 1-800-424-7508.

Reporters from outside the U.S. may access the call by dialing 1-312-399-1091.

Reporters may dial a taped rebroadcast of the call tonight by calling 1-800-843-8190. The call will be rebroadcast on the hour beginning at 6 p.m. EST and continuing until 10 p.m. EST. The call will also be rebroadcast Thursday, November 5, on the hour between 9 a.m. EST and 5 p.m. EST, and may be accessed by dialing 1-800-835-9701.