COMMUNICATIONS FIRMS ANNOUNCE MERGER

The third-largest merger in U.S. history was completed Tuesday morning when SBC Communications Inc. acquired Pacific Telesis Group in a deal worth $16.7 billion.

The merger will benefit employees, stockholders and consumers, said SBC chairman and chief executive officer Edward E. Whitacre Jr. during a national media telephone conference Tuesday.

The only bigger mergers in U.S. history were Kohlberg Kravis Roberts & Co.'s $25 billion purchase of RJR Nabisco Inc. in 1989, and Walt Disney Co.'s $19 billion acquisition of Capital Cities/ABC last year.

Another $23 billion merger of Baby Bells -- Bell Atlantic Corp. and Nynex Corp. -- is awaiting completion.

California regulators had given final approval Monday afternoon to the SBC-Pacific merger, which creates a local-telephone powerhouse covering seven states with a market value of $47.9.billion, annual revenues of $23.5 billion and cash flow of more than $10 billion.

The merger, which also involves more than 110,000 workers, was effective Tuesday, said Whitacre. SBC and Pacific agreed to conditions set by the California Public Utility Commission, which includes a refund of $213.5 million over five years to customers of Pacific Bell, PacTel's phone subsidiary.

On hand for the media merger announcement was Philip J. Quigley, previously of Pacific Telesis and a new SBC vice chairman who told the group that Tuesday was a historic day for SBC Communications.

"We're bigger and better than we were yesterday, with greater opportunities to cope in the industry next century," said Quigley.,

The new SBC will provide local phone service in California, Nevada, Texas, Oklahoma, Arkansas, Missouri and Kansas.

Although much of the early attention will be devoted to California and Texas operations, Whitacre said Missourians would be impacted by the merger.

"What it means is that SBC will be able to offer better services, more service at better rates," he said. "At this point, we can't just say what impact it will have in Missouri and Kansas, but we'll be working for improvements everywhere."

One of the new services could be long-distance.

SBC has filed for long-distance, and is prepared to meet the marketplace requirements.

"We have to wait now for all the regulatory hurdles," said Whitacre, "But I am confident that we will be a long-distance operator sometime this year."

The merger creates the second-largest telecommunications company in the U.S., with more than 31.4 million access lines and over 87 million potential wireless customers in the nation, including Cellular One.

The combined company, with all of its subsidiaries, can offer products and services under some of the strongest brands in the industry, said Whitacre. The Pacific Bell and Nevada Bell brands will continue to be used in California and Nevada; the Southwestern Bell brand in Texas, Oklahoma, Missouri, Arkansas and Kansas; and the Cellular One brand in Illinois, Massachusetts, Baltimore, Washington D.C., and New York.

SBC corporate headquarters will remain in San Antonio, Texas. The company will maintain headquarters of Pacific Bell and Nevada Bell in California and Nevada.

Although no specific headquarters locations have been announced, Whitacre indicated the company would be looking at San Diego and Los Angeles for two of four locations.

The merger is the latest in a series of moves by SBC since its foundation as an independent company in 1984. The 1987 acquisition of Metromedia put SBC in the forefront for wireless communications. Today SBC is one of the largest wireless communications companies in the world.

In 1990, SBC bought a stake in Telefonos de Mexico (Telmex). More than 50 percent of international calls to Mexico and 20 percent of calls to Asia originate in locations where the newly combined company has network facilities.