American Telephone & Telegraph Co. said Monday it has agreed to merge with McCaw Cellular Communications Inc. in a $12.6 billion stock swap that would combine the leaders in long-distance and wireless phone service.
AT&T is a global leader in long-distance telephone service, while McCaw is a pioneer in cellular, paging and other wireless communications services that comprise the fastest-growing segment of the telecommunications industry. McCaw chiefly operates under the Cellular One brand name.McCaw operates in Utah as Cellular One cellular phone service.
The deal, which is subject to regulatory and other approvals, would give McCaw shareholders one share of AT&T stock for each share of McCaw common.
The companies said the decision to merge grew from from last November's announcement that AT&T and McCaw were planning a strategic alliance in which AT&T would buy a one-third interest in McCaw for $3.8 billion.
Analysts said the move will give AT&T a better return on its stake.
Since broken apart and pushed out of the local telephone business a decade ago in an agreement with the Justice Department, AT&T has formed alliances or bought companies with computer or communications products that add to the value of its long distance network.
The companies said their boards have approved the merger pact. The deal was also approved by the board of British Telecommunications PLC, a holder of 35.8 million shares of McCaw.
AT&T and British Telecom are fierce rivals in international markets and British Telecom recently made a $4.3 billion investment in MCI Telecommunications, the second-largest U.S. long-distance carrier after AT&T.
In early trading Monday on the New York Stock Exchange, AT&T was down $1 a share at $61.371/2. McCaw jumped $4.75 a share to $56 in early NASDAQ trading.
AT&T said it hopes to complete the deal in less than a year, and the companies said they expect no jobs would be lost as a result of the merger.
AT&T Chairman Robert E. Allen called wireless communications services "absolutely central to AT&T's networking strategy and key to the company's future earnings growth."
McCaw's chairman and chief executive, Craig O. McCaw, said bold steps like the proposed merger of AT&T and McCaw must be taken if the United States is to remain the leader in development of wireless communications.
"Our companies share a vision of anytime, anywhere communications that will be very powerful for an increasingly broad base of customers," McCaw said in a statement.
McCaw said he has agreed to become a member of the AT&T board.
James L. Barksdale, who joined McCaw in 1991, will remain president and chief operating officer of AT&T's new wireless service business.
The deal is subject to approval by McCaw shareholders, the U.S. Department of Justice and the Federal Communications Commission as well as by various state regulatory authorities.
New York-based AT&T had revenue of $64.9 billion in 1992 and has about 316,000 employees. It has about 2.4 million shareowners.
McCaw is based in Kirkland, Wash., where its headquarters are expected to remain. It had 1992 revenues of $1.74 billion and directly employs 4,400 people. It also owns a majority stake in LIN Broadcasting, which employs another 1,900 people.