AT&T and McCaw Cellular complete largest ever telecom merger

NEW YORK – September 20, 1994 -- AT&T and McCaw Cellular Communications Inc. have completed one of the largest mergers on record and the biggest in telecommunications history.

Based on AT&T's recent stock price, the merger is valued at $11.5 billion.

The merger positions AT&T as the nation's largest provider of wireless services. McCaw, with 3.9 million customers for cellular-telephone, advanced messaging, wireless data-transmission and air-to-ground services, is the leader in the telecommunications industry's fastest-growing segment.

Wireless technology is integral to many of the products and services AT&T plans to offer consumers and businesses well into the 21st Century, and is central to AT&T's strategy of being the world's networking leader.

McCaw Cellular becomes AT&T's newest business unit, named AT&T Wireless Services.

The deal, announced 13 months ago, was finalized Monday with the filing of a certificate of merger with the office of the Delaware Secretary of State in Dover, Del. The merger's last hurdle was passed earlier Monday when the Federal Communications Commission approved a transfer of radio licenses held by McCaw to AT&T.

"By joining forces with McCaw, we are taking a giant step forward in `anytime, anywhere' communications, creating a company that can take wireless technology to places it has never been before," said AT&T Chairman Robert E. Allen.

"Together, we will not only satisfy customers' growing appetite for mobility, we will serve up that mobility with a range of wireless services that goes beyond anything most of us have ever imagined."

The merger also helps AT&T achieve its goal of revenue growth and enhances prospects for increasing shareowner value as the market for wireless services grows. McCaw achieved the first profitable period in its history in this year's second quarter.

AT&T said there would be earnings dilution from issuing additional shares and one-time, merger-related expenses.

Craig O. McCaw, chairman and CEO of McCaw Cellular, will be nominated to become a member of AT&T's board of directors.

James L. Barksdale, McCaw Cellular's president and chief operating officer, will become chief executive officer of AT&T Wireless Services.

Barksdale, who joined McCaw in 1991 after serving as chief operating officer at Federal Express, will report directly to AT&T's Allen.

Craig McCaw, who founded McCaw Cellular in 1981, said: "It has been our dream to endow ordinary people with the personal freedom of simpler times, while enhancing the economic benefits and productivity expected of modern society.

"To fulfill that dream, we believe that intelligent wireless devices must be accessible to a much broader spectrum of society," he said. "It is our earnest hope that the marriage of McCaw and AT&T will bring the requisite price, quality and service to the mass market in the shortest possible time."

Speaking of McCaw Cellular employees, he said: "I am truly proud of the extraordinary people who have brought McCaw Cellular so far in such a short period of time. Their energy, enthusiasm and commitment have been a dream come true for their fellow team members and for me. No one could ask for more."

Allen said AT&T would bring its high standards for quality, reliability and innovation to current and future wireless customers, serving them at a level against which other players in this competitive industry will begin to measure themselves.

For example, all McCaw paging and messaging services, which are now offered under six different brand names, will have the AT&T brand name by the end of the year.

In addition, AT&T will move quickly to offer innovative two-way paging services that can be tied to a customer's AT&T Easy Reach* 500 Service personal 500 number.

Further, customers enrolled in an AT&T True Rewards* plan will be able to redeem points for McCaw cellular and paging services.

Allen said AT&T also pledges to continue devoting substantial resources toward research and development of innovative products and services in wireless communications, a technology pioneered at AT&T Bell Laboratories.

All necessary approvals for the merger have been obtained from the U.S. District Court in Washington, the U.S. Department of Justice, state regulators and McCaw shareowners. The boards of the two companies approved the merger when it was proposed in August 1993.

Under a consent decree AT&T signed with the Justice Department in July, cellular customers in McCaw's service areas will be allowed to choose a long-distance carrier for their cellular calls. All long-distance carriers will be allowed to compete for that business.

In addition, the consent decree requires AT&T and McCaw to maintain separate corporate structures and financial records. The decree also requires AT&T to ensure that competing cellular-services providers are not disadvantaged when purchasing their network equipment from AT&T.

On September 14, Bell Atlantic and NYNEX withdrew their request for a preliminary injunction to enjoin the merger, and a federal district court judge set a trial date of November 1 on their request for a permanent injunction.

The merger will be accomplished through a tax-free exchange of stock to holders of McCaw shares, who will receive one share of AT&T stock for each share of McCaw stock. AT&T will issue about 209 million shares to complete the merger.

As part of the merger, British Telecom will receive 35.8 million shares of AT&T stock for its stake in McCaw.

Allen said the new unit's promising growth prospects make the merger good news for employees. However, the merger is not expected to have any immediate impact on the number of employees at the new unit or the rest of AT&T. Headquarters of AT&T Wireless Services will be in Kirkland, Wash.

McCaw had 1993 revenues of $2.2 billion, including revenues from LIN Broadcasting Corp., which is 52-percent owned by McCaw. McCaw had assets of $9.1 billion and long-term debt of $5.3 billion as of June 30, 1994. The company has 5,150 employees. LIN has 3,640 employees.

AT&T had 1993 revenues of $67.1 billion and assets, as of June 1994, of $64.3 billion. The global communications and computer company, headquartered here, has about 2.3 million shareowners and 300,000 employees.

* Easy Reach and AT&T True Rewards are registered trademarks of AT&T Corp.