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AT & T And Mccaw Merger Case Study

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Introduction Our case study titled, The AT&T and McCaw merger negotiation, provides us with an opportunity to negotiate the terms of the merger between McCaw cellular and AT&T. McCaw was the largest competitor in the rapidly growing cellular telephone communications industry. AT&T was the dominant competitor in long-distance telephone communications in the United States, and one of the largest corporations. Prior to the negotiations, it had no position in cellular communications. Brief Insight: McCaw Cellular Communications McCaw Cellular was a Kirkland, Washington-based wireless provider operating in the largest urban areas under the name Cellular One. McCaw had been one of the first to recognize that cellular (or wireless) …show more content…

• Regulators prohibit transactions between At&T’s equipment subsidiary and McCaw minimizing the potential for synergies between the two affiliates. • Regulators prohibit joint marketing of AT&T long distance service and McCaw’s cellular service. • Regulators prohibit entry into other related markets such as PCS or local telephone service in return for letting the acquisition go through. McCaw’s Operational Risks • AT&T wants to grow the business in a slow, orderly fashion. • McCaw’s employees don’t fit well within AT&T operations, both culturally and technically. • McCaw’s network is at full capacity in all markets, requiring AT&T to upgrade all of McCaw’s markets at the same time. VALUATION Current market prices: Both McCaw and AT&T’s common shares are publicly traded. The market value of the equity can be summed with the book value of debt to give a rough estimate of the firm’s current value. The calculation that follows suggests a value for McCaw’s assets of about $10.5 billion. McCaw’s shares may be trading at a minority discount, because the CEO holds a controlling block of shares. To purchase a partial

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