SBC, BellSouth Agree to Sell Units

SBC Communications Inc. and BellSouth Corp. won U.S. Justice Department approval to create the nation’s second-largest mobile-phone company after agreeing to sell overlapping properties in 16 markets with 20 million people.

Federal law prohibits a phone company from owning two major wireless operating licenses in the same market. To conform to that restriction, the companies will divest wireless units in Los Angeles, New Orleans, Indianapolis and several other regions.

In Los Angeles, BellSouth and AT&T; Corp. jointly own the AT&T; Wireless business (formerly L.A. Cellular), with BellSouth owning 45% of the partnership. SBC owns a rival service sold under the Pacific Bell Wireless brand.

While the companies have not said which operation will be sold, it is a near-certainty that BellSouth will sell its minority stake to AT&T; Wireless--making the switch transparent to customers, because AT&T; already manages the Los Angeles operation.

BellSouth and SBC will announce their formal plan for the Los Angeles properties by Dec. 18. Not coincidentally, the deadline corresponds to the date when AT&T; and BellSouth are free to renegotiate terms of their partnership.

The transaction between SBC and BellSouth, which the companies expect to complete late in the third or early in the fourth quarter, still requires approval from the U.S. Federal Communications Commission.

The companies said in April that they will combine their wireless operations to reach 70% of the nation with networks in 19 of the top 20 U.S. markets. The venture will have 17.9 million subscribers--mostly in the Midwest, Southwest and Southeast--and trail only Verizon Wireless, with 25.4 million.

Phone companies are seeking to build nationwide wireless networks to cut costs as customers increasingly travel outside their home regions and demand more services, such as Internet access, using their wireless phones. The new venture will help SBC and BellSouth cut costs and compete more efficiently against Verizon and AT&T;, now the No. 3 wireless carrier.

The agreement to sell properties “ensures that this joint venture will not reduce competition in these local markets,� said Joel I. Klein, the Justice Department’s chief antitrust enforcer.

Without the divestitures, customers “would have had fewer choices and would’ve faced the risk of higher prices and lower quality service,� he said in a statement.

The companies have agreed to sell assets in Indianapolis to AT&T; and in New Orleans to Alltel Corp.

SBC, the No. 2 local-phone company, will own 60% of the venture with BellSouth, which sells local-phone service in nine states from North Carolina to Florida, the company said. SBC Wireless President Stephen Carter will manage the venture.

The companies have said they may buy other companies, bid on new wireless licenses and issue debt or stock to raise cash for expansion.

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Bloomberg News was used in compiling this report. Times staff writer Elizabeth Douglass contributed to this report.