SBC Communications has announced that it will buy AT&T for about $16 billion (€12.3 billion), making it the largest US telecommunications company. The deal will bring to an end AT&T's two-decade decline since it lost its US monopoly.

The purchase, which will face antitrust hurdles, will make SBC the largest US provider of landline and wireless communications services to homes and businesses, with about $90 billion in annual revenues.

"We've seized a great opportunity and asset in AT&T," SBC chairman Mr Ed Whitacre told a conference call with analysts. "We obtained these assets for a fair price that will pay for itself in a very short period of time."

SBC's acquisition of the largest long-distance carrier includes $14.7 billion in SBC stock and a special cash dividend of roughly $1.04 billion to be paid by AT&T to its shareholders when the deal closes.

SBC will issue 0.78 of a share for each AT&T share, valuing AT&T at $18.41 a share. AT&T will then pay a special dividend of $1.30 a share. Combined, the deal would value AT&T at $19.71 a share - equal to its closing stock price last Friday.

Shares of AT&T had risen on Friday on media reports of a deal with SBC, after closing on Thursday at $18.46. Analysts have criticised the price for the deal, which is expected to close by the first half of 2006, as too much for a company with shrinking revenues and questionable growth prospects.

AT&T, whose history dates back 130 years to the invention of the telephone, has been slammed by increasing competition from SBC and other dominant local carriers in the long-distance market. AT&T's market value and revenues peaked in 1999.

"AT&T's business doesn't seem that accretive or value-added," said Mr Greg Gorbatenko, an analyst with Marquis Investment Research.

AT&T last July said it would pull back from the residential market, stung by government regulation and a changing marketplace as consumers turn increasingly to wireless services.

Banc of America analyst Mr David Barden said SBC will have to issue about 625 million new shares under the deal, diluting its current equity by 19 per cent.

A combination of AT&T and SBC would reunite "Ma Bell," as AT&T was known for years, with a "Baby Bell," one of the local phone companies spun off from AT&T due to antitrust rulings in 1984. Former Federal Communications Commission chief Mr Reed Hundt had deemed such a reunion "unthinkable" in 1997.

For Mr Whitacre, a voracious purchaser of companies during his 15-year tenure at the helm of the Texas-based company, buying AT&T would complete a transformation of SBC from a regional, local telephone company into an international force. - (Reuters)