Cingular Wireless on Tuesday won an auction for smaller rival AT&T Wireless Services Inc with a $41 billion offer that edged out Britain's Vodafone Group Plc and secured its future as the largest wireless carrier in the United States.
The combined company leapfrogs current market leader Verizon Wireless, giving it 46 million customers, annual revenues of more than $32 billion and a presence in 97 of the top 100 US markets.
The $41 billion bid, worth $15 per share, was the largest all-cash offer in history, according to merger and acquisition research firm Dealogic, and marked a 30-percent premium over AT&T Wireless' closing stock price of $11.82 on Friday. The US financial markets were closed on Monday for the President's Day holiday.
The deal also marked the start of long-awaited consolidation in the crowded US wireless market in which six national brands and a handful of regional players are battling for market share as subscriber growth is slowing.
Cingular, which is owned by local telephone companies SBC Communications Inc and BellSouth Corp, hiked its offer from $14 a share late on Monday in what sources close to the talks called an 11th-hour effort to cement a deal.
In pre-market trading on Tuesday, shares of Redmond, Washington-based AT&T Wireless jumped to $13.92 on INET.
Over the past month, shares of AT&T Wireless had surged 38 percent as investor enthusiasm for a merger overshadowed the company's weak fourth-quarter performance and forecast for customer-losses through the first half of 2004.
"We think that the price we paid is a fair price. Yes, AT&T Wireless has some issues but we think the company was sound before those problems and we view the problems as being temporary in nature," Cingular Chief Operating Officer Ralph De La Vega said in a telephone interview.
In the fourth-quarter, AT&T Wireless lost customers and missed out on several hundred thousand potential new subscribers due to technical and customer-service problems.
Shares of SBC fell to $25 in pre-market trading, down from a closing stock price of $25.05 on Friday. There were no early trades on INET for BellSouth, which closed at $29.55 on Friday.
Analysts had expected Cingular to fight hard to outbid financially powerful Vodafone, which was eager to take control of a US operator and bring its brand across the Atlantic.
The bid valued AT&T Wireless at almost three times the level its shares were trading at last March.
"You can't just value companies based on today's stock prices. Their value is based on spectrum and services and technology. It's based on being able to deliver the next wave of technology and services we haven't even invented yet," said independent telecommunications analyst Jeffrey Kagan.
Shares in Vodafone rose 5 percent in London on investor relief it had not won an earnings-dilutive deal.
The world's largest mobile phone group said it had abandoned the auction and would instead stick to its 45-percent stake in Verizon Wireless, the largest US wireless company.
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