Subject: [NEXTEL-1] Cingular $15-per-share cash bid wins AT&T Wireless

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Date: Tue, 17 Feb 2004 11:50:24 (GMT)

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Cingular $15-per-share cash bid wins AT&T Wireless

By Emily Church, CBS.MarketWatch.com
Last Update: 6:13 AM ET Feb 17, 2004

LONDON (CBS.MW) - Cingular Wireless on Tuesday won an agreement to buy AT&T Wireless after raising its offer to $15 a share in cash, valuing the deal at about $41 billion.

At that price, Cingular looks to have raised its initial offer for AT&T Wireless (AWE)
by as much as 36 percent as it battled Britain's Vodafone Group (VOD)
through the weekend.

The price tag for AT&T Wireless, the third largest operator in the U.S., drew gasps in London. On Friday, analysts and observers had been predicting bids around $12 a share.

"At $15 dollars a share, it shows you just how exciting the bidding got," said Morten Singleton, an industry analyst at Williams de Broe in London.

The deal values AT&TW at 9.9 times its underlying earnings in 2005, which is currently higher than what the market has valued each of AT&TW's European peers.

Vodafone, the largest in Europe, is valued around 5 times underlying earnings, Christian Maher, analyst at Investec Securities in London said.

Cost savings goals outlined

By acquiring AT&TW, Cingular will become the leading operator with 46 million customers and coverage in 97 of the top 100 markets.

"By combining the strengths of these two companies we expect to accelerate the availability of advanced wireless services for consumers," said Stan Sigman, Cingular's president and CEO, in a statement.

Cingular was widely viewed as the company with the most to gain by acquiring AT&T Wireless because of the cost savings it could achieve.

Cingular said it expects to generate more than $1 billion in operating expense and capital expenditure savings in 2006, and in excess of $2 billion in annual savings beginning in 2007. It plans to consolidating networks, distribution, billing, procurement, marketing, advertising and other functions.

The boards for Cingular and AT&T Wireless approved the terms. Cingular said its corporate parents SBC Communications (SBC)
and BellSouth (BLS)
have committed funding for the all cash deal.

SBC is expected to contribute around $25 billion and for BellSouth, around $16 billion. SBC's and BellSouth's proportionate equity stake in Cingular will remain unchanged following the transaction, with SBC holding 60 percent and BellSouth 40 percent of the equity.

Vodafone (VOD)
earlier Tuesday confirmed in a statement to the London Stock Exchange that it withdrew from the auction on Tuesday "when it concluded that it was no longer in its shareholder's best interests to continue discussions."

Vodafone said it "remains committed to its existing position in the US market with its successful partnership in Verizon Wireless." Vodafone owns a 45percent stake in Verizon Wireless. VOD shares surged 6 percent in London.

AT&T Wireless surged to $14 on Instinet, up from an $11.82 close. SBC and BLS were not yet active, dealers said.

Vodafone had dropped 6 percent since late January, when reports started to widely circulate that Vodafone was mulling a bid.

Vodafone shareholders "need to closely examine the U.S. strategy now but - and it's a significant but -- the 45 percent stake in Verizon Wireless must be worth more than it was before this bidding began," said Maher, as the U.S. goes to five competitors from six.

DoCoMo (DCM)
and Nextel Communications (NXTL)
reportedly bowed out as the asking price for AT&T Wireless escalated. See full story.

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